6331 - Code and Regulations

Home Services FAQ Site Map Contact Us

Articles by Alvin Brown
Tax Preparation
Offer In Compromise
State Offers in Compromise
Levy
IRS Tax Liens
IRS Tax Liens - continued
IRS Tax Liens - continued 2
Levy - continued
IRS Audits
Audit Techniques Guide
Congressional Contacts
Criminal Investigation
D.O.J Criminal Tax Manual
Tax Litigation
Penalty
Installment Agreements
Statute of Limitations
Frivolous Tax Argument
Interest Abatement
IRS Misconduct
IRS Abuses
Tax Fraud
Fraud Statutes
Bankruptcy
Tax Reform Legislation
Tax Shelters
Tax Court
Trust Fund Penalty
Legislation
Innocent Spouse Relief
Important Links

Actions & Restrictions on Levy
Serving & Releasing Levies
Jeopardy Levy
Bank Levies
Levy on Income
Levy in Special Cases
Automated Levy Programs
6331 Code and Regulations
6332 Code and Regulations
6333 Code and Regulations
6334 Code and Regulations
6335 Code and Regulations
6336 Code and Regulations
6337 Code and Regulations
6338 Code and Regulations
6339 Code and Regulations
6340 Code and Regulations
6341 Code and Regulations
6330 Code and Regulations
6331 Court Order
6331 Damages
6331 Debt
6331 Community Property
6331 Effective Levy
6331 Bankruptcy p1
6331 Bankruptcy p2
6331 Bankruptcy p3
6331 Bankruptcy p4
6331 Bankruptcy p5
6331 Bankruptcy p6
6331 Bail Money
6331 Bank Account
6331 Bank Vault
6331 Alimony Funds
6331 Continuous Levy
Publication 4418 - Levy Program
Pre Seizure Considerations Tax Levy
Pre Approval Post Approval
Actions Prior to sale of seized property
IRS Seizure Sale Procedures
How IRS Conducts a Seizure of  Property
Property acquired and disposed by IRS
Judicial Sale of Levied Property
Understanding your IRS Notice
Releasing Levies and Levied Property
7426 Code and Regulations
Amendment to section 6330 Regulations
6320 Proposed Amendments of Regulations
6332 - Seizure of Property Subject to Distraint
6332 - Annotations- Salary
6332 - Annotations- Savings Account Attachment
6332 - Annotations- Summary Judgment
6332 - Annotations- State Auditor
6332 - Annotations- State Funds
6332 - Annotations-Prior Law
6332 - Annotations- Surety
6332 - Annotations- Title in Dispute
6332 - Annotations- Attorney Fees
6332 - Annotations- Attorney's Liability
6332 - Annotations- Bank Accounts p1
6332 - Annotations- Bank Accounts p2
6332 - Annotations- Bank Accounts p3
6332 - Annotations- Bank Accounts p4
6332 - Annotations- Bank Accounts p5
6332 - Annotations- Commissions
6332 - Annotations- Corporations Obligations
6332 - Annotations- Effect of Honoring Levy p1
6332 - Annotations- Effect of Honoring Levy p2
6332 - Annotations- Effect of Honoring Levy p3
6332 - Annotations- Effect of Honoring Levy p4
6332 - Annotations- Effect of Honoring Levy p5
6332 - Annotations- Effect of payment of tax
6332 - Annotations- Embezzled Funds
6332 - Annotations- Partnership Property
6332 - Annotations- Levy and Demand
Property in Custody of County Commissioner
6332 - Annotations- Property of Another
6332 - Annotations- Property in Custody of State Court
6332 - Annotations- Reasonable Cause
6332 - Annotations- Property Unlawfully Obtained
6333 - Annotations- No Levy Pending
6334 - Annotations- Child Support
6334 - Annotations- Amount of Exemption
6334 - Annotations- Books Furniture tools
6334 - Annotations- Homestead p1
6334 - Annotations- Homestead p2
6334 - Annotations- Homestead p3
6334 - Annotations- Clothing
6334 - Annotations- Disability Benefits
6334 - Annotations- Retirement Accounts p1
6334 - Annotations- Retirement Accounts p2
6334 - Annotations- Military Retirement Benifits
6334 - Annotations- Net Pay
6334 - Annotations- State Exemption Law
6334 - Annotations- Seaman's Wage Statute
6334 - Annotations- Social Security Benfits
6334 - Annotations- Prior Law
6334 - Annotations- Subsequently Receieved Wages
6334 - Annotations- Worker's Compensation
6335 - Annotations- Designation of Proceeds
6335 - Annotations- Bailment Lessor
6335 - Annotations- Damage Suit Against Collector p1
6335 - Annotations- Damage Suit Against Collector p2
6335 - Annotations- Husband and Wife
6335 - Annotations- Effect of Vacating Invalid Sale
6335 - Annotations- Homesteads p1
6335 - Annotations- Homesteads p2
6335 - Annotations- Homesteads p3
6335 - Annotations- Jeopardy Assessments
6335 - Annotations- Injunctive Relief
6335 - Annotations- Interest
6335 - Annotations- Minimum Price
6335 - Annotations- Jurisdiction
6335 - Annotations- Late Payment
6335 - Annotations- Place of Sale
6335 - Annotations- Notice of Adjournment
6335 - Annotations- Notice of Sale or Seizure p1
6335 - Annotations- Notice of Sale or Seizure p2
6335 - Annotations- Notice of Sale or Seizure p3
6335 - Annotations- Notice of Sale or Seizure p4
6335 - Annotations- Third-Party Interest p1
6335 - Annotations- Third-Party Interest p2
6335 - Annotations- Rescission
6335 - Annotations Seized Property Sale Report
6335 - Annotations--Prior Law
6335 - Annotations- Wrongful Sale
6330 Collection Due Process Hearing Requests
6330 - Annotations- Collection Due Process Notice
6330 - Annotations- Forms and Transcripts 1 p1
6330 - Annotations- Forms and Transcripts 1 p2
6330 - Annotations- Forms and Transcripts 1 p3
6330 - Annotations- Froms and Transcripts 1 p4
6330 - Annotations- Forms and Transcripts 1 p5
6330 - Annotations- Froms and Transcripts 2
6330 - Annotations- Hearing Procedures 1 p1
6330 - Annotations- Hearing Procedures 1 p2
6330 - Annotations- Hearing Procedures 1 p3
6330 - Annotations- Hearing Procedures 1 p4
6330 - Annotations- Hearing Procedures 2 p1
6330 - Annotations- Hearing Procedures 2 p2
6330 - Annotations- Hearing Procedures 2 p3
6330 - Annotations- Hearing Procedures 2 p4
6330 - Annotations- Hearing Procedures 3 p1
6330 - Annotations- Hearing Procedures 3 p2
6330 - Annotations- Hearing Procedures 3 p3
6330 - Annotations- Hearing Procedures 3 p4
6330 - Annotations- Hearing Procedures 4 p1
6330 - Annotations- Hearing Procedures 4 p2
6330 - Annotations- Hearing Procedures 4 p3
6330 - Annotations- Hearing Procedures 4 p4
6330 - Annotations- Hearing Procedures 5 p1
6330 - Annotations- Hearing Procedures 5 p2
6330 - Annotations- Hearing Procedures 5 p3
6330 - Annotations- Hearing Procedures 6 p1
6330 - Annotations- Hearing Procedures 6 p2
6330 - Annotations- Hearing Procedures 6 p3
6330 - Annotations- Impartial IRS Appeals Officers p1
6330 - Annotations- Impartial IRS Appeals Officers p2
6330 - Annotations- Issues Raised at Hearings 1 p1
6330 - Annotations- Issues Raised at Hearings 1 p2
6330 - Annotations- Issues Raised at Hearings 1 p3
6330 - Annotations- Issues Raised at Hearings 1 p4
6330 - Annotations- Issues Raised at Hearings 2 p1
6330 - Annotations- Issues Raised at Hearings 2 p2
6330 - Annotations- Issues Raised at Hearings 2 p3
6330 - Annotations- Issues Raised at Hearings 2 p4
6330 - Annotations- Issues Raised at Hearings 2 p5
6330 - Annotations- Issues Raised at Hearings 3 p1
6330 - Annotations- Issues Raised at Hearings 3 p2
6330 - Annotations- Issues Raised at Hearings 3 p3
6330 - Annotations- Issues Raised at Hearings 3 p4
6330 - Annotations- Issues Raised at Hearings 4 p1
6330 - Annotations- Issues Raised at Hearings 4 p2
6330 - Annotations- Issues Raised at Hearings 4 p3
6330 - Annotations- Issues Raised at Hearings 4 p4
Judical Review of Apepeals- Equivalent
Judical Review of Apepeals-District Co (1)
Judicial Review of Appeals-District Court p1
Judicial Review of Appeals-District Court p2
Judicial Review of Appeals-District Court p3
Judicial Review of Appeals-District Court p4
Judical Review of Apepeals-Filed in Wrong
Judicial Review of Appeals-Judicial Rev (1)
Judicial Review of Appeals-Judicial Review p1
Judicial Review of Appeals-Judicial Review p2
Judicial Review of Appeals-Judicial Review p3
Judicial Review of Appeals-Judicial Review p4
Judicial Review of Appeals-Judicial Review p5
Judicial Review of Appeals-Sovereign Immunity
Judicial Review of Appeals-Statute of Limitations
Judicial Review of Appeals-Tax Court 1 p1
Judicial Review of Appeals-Tax Court 1 p2
Judicial Review of Appeals-Tax Court 1 p3
Judicial Review of Appeals-Tax Court 1 p4
Judicial Review of Appeals-Tax Court 1 p5
Judical Review of Apepeals-Tax Court 2 p1
Judicial Review of Appeals-Tax Court 2 p2
Judicial Review of Appeals-Tax Court 2 p3
Judicial Review of Appeals-Timely Filing
6330 - Annotations- Prior Hearings p1
6330 - Annotations- Prior Hearings p2
6336 - Annotations- Injunctive Relief
6336 - Annotations- Value of Property
6337 - Annotations- Assignee
6337 - Annotations- Attempt to Assign
6337 - Annotations- Bankruptcy
6337 - Annotations- Fraud Right of Redemption
6337 - Annotations- Jurisdiction
6337 - Annotations- Periods for Redemption
6337 - Annotations- Proper Party
6337 - Annotations- Property Subject to Redemption
6337 - Annotations- Reaquisition by Prior Owner
6337 - Annotations- Representations
6337 - Annotations- Informal Redemption
6339 - Annotations- Effect of Faulty Transfer
6339 - Annotations- Sale of Taxpayers Real Property p1
6339 - Annotations- Sale of Taxpayers Real Property p2
6340 - Annotations- Purchaser of Property

 

6331 Code and Regulations


Back Next

Internal Revenue Code 6631 - LEVY AND DISTRAINT

 

6331(a) AUTHORITY OF SECRETARY. --If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax. Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality of the United States or the District of Columbia, by serving a notice of levy on the employer (as defined in section 3401(d)) of such officer, employee, or elected official. If the Secretary makes a finding that the collection of such tax is in jeopardy, notice and demand for immediate payment of such tax may be made by the Secretary and, upon failure or refusal to pay such tax, collection thereof by levy shall be lawful without regard to the 10-day period provided in this section.

 

6331(b) SEIZURE AND SALE OF PROPERTY. --The term "levy" as used in this title includes the power of distraint and seizure by any means. Except as otherwise provided in subsection (e), a levy shall extend only to property possessed and obligations existing at the time thereof. In any case in which the Secretary may levy upon property or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible or intangible).

 

6331(c) SUCCESSIVE SEIZURES. --Whenever any property or right to property upon which levy has been made by virtue of subsection (a) is not sufficient to satisfy the claim of the United States for which levy is made, the Secretary may, thereafter, and as often as may be necessary, proceed to levy in like manner upon any other property liable to levy of the person against whom such claim exists, until the amount due from him, together with all expenses, is fully paid.

 

6331(d) REQUIREMENT OF NOTICE BEFORE LEVY. --

 

6331(d)(1) IN GENERAL. --Levy may be made under subsection (a) upon the salary or wages or other property of any person with respect to any unpaid tax only after the Secretary has notified such person in writing of his intention to make such levy.

 

6331(d)(2) 30- DAY REQUIREMENT. --The notice required under paragraph (1) shall be --

 

6331(d)(2)(A) given in person,

 

6331(d)(2)(B) left at the dwelling or usual place of business of such person, or

 

6331(d)(2)(C) sent by certified or registered mail to such person's last known address, no less than 30 days before the day of the levy.

 

6331(d)(3) JEOPARDY. --Paragraph (1) shall not apply to a levy if the Secretary has made a finding under the last sentence of subsection (a) that the collection of tax is in jeopardy.

 

6331(d)(4) INFORMATION INCLUDED WITH NOTICE. --The notice required under paragraph (1) shall include a brief statement which sets forth in simple and nontechnical terms --

 

6331(d)(4)(A) the provisions of this title relating to levy and sale of property,

 

6331(d)(4)(B) the procedures applicable to the levy and sale of property under this title,

 

6331(d)(4)(C) the administrative appeals available to the taxpayer with respect to such levy and sale and the procedures relating to such appeals,

 

6331(d)(4)(D) the alternatives available to taxpayers which could prevent levy on the property (including installment agreements under section 6159),

 

6331(d)(4)(E) the provisions of this title relating to redemption of property and release of liens on property, and

 

6331(d)(4)(F) the procedures applicable to the redemption of property and the release of a lien on property under this title.

 

6331(e) CONTINUING LEVY ON SALARY AND WAGES. --The effect of a levy on salary or wages payable to or received by a taxpayer shall be continuous from the date such levy is first made until such levy is released under section 6343.

 

6331(f) UNECONOMICAL LEVY. --No levy may be made on any property if the amount of the expenses which the Secretary estimates (at the time of levy) would be incurred by the Secretary with respect to the levy and sale of such property exceeds the fair market value of such property at the time of levy.

 

6331(g) LEVY ON APPEARANCE DATE OF SUMMONS. --

 

6331(g)(1) IN GENERAL. --No levy may be made on the property of any person on any day on which such person (or officer or employee of such person) is required to appear in response to a summons issued by the Secretary for the purpose of collecting any underpayment of tax.

 

6331(g)(2) NO APPLICATION IN CASE OF JEOPARDY. --This subsection shall not apply if the Secretary finds that the collection of tax is in jeopardy.

 

6331(h) CONTINUING LEVY ON CERTAIN PAYMENTS. --

 

6331(h)(1) IN GENERAL. --If the Secretary approves a levy under this subsection, the effect of such levy on specified payments to or received by a taxpayer shall be continuous from the date such levy is first made until such levy is released. Notwithstanding section 6334, such continuous levy shall attach to up to 15 percent of any specified payment due to the taxpayer.

 

6331(h)(2) SPECIFIED PAYMENT. --For the purposes of paragraph (1), the term "specified payment" means --

 

6331(h)(2)(A) any Federal payment other than a payment for which eligibility is based on the income or assets (or both) of a payee,

 

6331(h)(2)(B) any payment described in paragraph (4), (7), (9), or (11) of section 6334(a), and

 

6331(h)(2)(C) any annuity or pension payment under the Railroad Retirement Act or benefit under the Railroad Unemployment Insurance Act.

 

6331(h)(3) INCREASE IN LEVY FOR CERTAIN PAYMENTS. --Paragraph (1) shall be applied by substituting "100 percent" for "15 percent" in the case of any specified payment due to a vendor of goods or services sold or leased to the Federal Government.

 

6331(i) NO LEVY DURING PENDENCY OF PROCEEDINGS FOR REFUND OF DIVISIBLE TAX. --

 

6331(i)(1) IN GENERAL. --No levy may be made under subsection (a) on the property or rights to property of any person with respect to any unpaid divisible tax during the pendency of any proceeding brought by such person in a proper Federal trial court for the recovery of any portion of such divisible tax which was paid by such person if --

 

6331(i)(1)(A) the decision in such proceeding would be res judicata with respect to such unpaid tax; or

 

6331(i)(1)(B) such person would be collaterally estopped from contesting such unpaid tax by reason of such proceeding.

 

6331(i)(2) DIVISIBLE TAX. --For purposes of paragraph (1), the term "divisible tax" means --

 

6331(i)(2)(A) any tax imposed by subtitle C; and

 

6331(i)(2)(B) the penalty imposed by section 6672 with respect to any such tax.

 

6331(i)(3) EXCEPTIONS. --

 

6331(i)(3)(A) CERTAIN UNPAID TAXES. --This subsection shall not apply with respect to any unpaid tax if --

 

6331(i)(3)(A)(i) the taxpayer files a written notice with the Secretary which waives the restriction imposed by this subsection on levy with respect to such tax; or

 

6331(i)(3)(A)(ii) the Secretary finds that the collection of such tax is in jeopardy.

 

6331(i)(3)(B) CERTAIN LEVIES. --This subsection shall not apply to --

 

6331(i)(3)(B)(i) any levy to carry out an offset under section 6402; and

 

6331(i)(3)(B)(ii) any levy which was first made before the date that the applicable proceeding under this subsection commenced.

 

6331(i)(4) LIMITATION ON COLLECTION ACTIVITY; AUTHORITY TO ENJOIN COLLECTION. --

 

6331(i)(4)(A) LIMITATION ON COLLECTION. --No proceeding in court for the collection of any unpaid tax to which paragraph (1) applies shall be begun by the Secretary during the pendency of a proceeding under such paragraph. This subparagraph shall not apply to --

 

6331(i)(4)(A)(i) any counterclaim in a proceeding under such paragraph; or

 

6331(i)(4)(A)(ii) any proceeding relating to a proceeding under such paragraph.

 

6331(i)(4)(B) AUTHORITY TO ENJOIN. --Notwithstanding section 7421(a), a levy or collection proceeding prohibited by this subsection may be enjoined (during the period such prohibition is in force) by the court in which the proceeding under paragraph (1) is brought.

 

6331(i)(5) SUSPENSION OF STATUTE OF LIMITATIONS ON COLLECTION. --The period of limitations under section 6502 shall be suspended for the period during which the Secretary is prohibited under this subsection from making a levy.

 

6331(i)(6) PENDENCY OF PROCEEDING. --For purposes of this subsection, a proceeding is pending beginning on the date such proceeding commences and ending on the date that a final order or judgment from which an appeal may be taken is entered in such proceeding.

 

6331(j) NO LEVY BEFORE INVESTIGATION OF STATUS OF PROPERTY. --

 

6331(j)(1) IN GENERAL. --For purposes of applying the provisions of this subchapter, no levy may be made on any property or right to property which is to be sold under section 6335 until a thorough investigation of the status of such property has been completed.

 

6331(j)(2) ELEMENTS IN INVESTIGATION. --For purposes of paragraph (1), an investigation of the status of any property shall include --

 

6331(j)(2)(A) a verification of the taxpayer's liability;

 

6331(j)(2)(B) the completion of an analysis under subsection (f);

 

6331(j)(2)(C) the determination that the equity in such property is sufficient to yield net proceeds from the sale of such property to apply to such liability; and

 

6331(j)(2)(D) a thorough consideration of alternative collection methods.

 

6331(k) NO LEVY WHILE CERTAIN OFFERS PENDING OR INSTALLMENT AGREEMENT PENDING OR IN EFFECT. --

 

6331(k)(1) OFFER-IN-COMPROMISE PENDING. --No levy may be made under subsection (a) on the property or rights to property of any person with respect to any unpaid tax --

 

6331(k)(1)(A) during the period that an offer-in-compromise by such person under section 7122 of such unpaid tax is pending with the Secretary; and

 

6331(k)(1)(B) if such offer is rejected by the Secretary, during the 30 days thereafter (and, if an appeal of such rejection is filed within such 30 days, during the period that such appeal is pending).

 

For purposes of subparagraph (A), an offer is pending beginning on the date the Secretary accepts such offer for processing.

 

6331(k)(2) INSTALLMENT AGREEMENTS. --No levy may be made under subsection (a) on the property or rights to property of any person with respect to any unpaid tax --

 

6331(k)(2)(A) during the period that an offer by such person for an installment agreement under section 6159 for payment of such unpaid tax is pending with the Secretary;

 

6331(k)(2)(B) if such offer is rejected by the Secretary, during the 30 days thereafter (and, if an appeal of such rejection is filed within such 30 days, during the period that such appeal is pending);

 

6331(k)(2)(C) during the period that such an installment agreement for payment of such unpaid tax is in effect; and

 

6331(k)(2)(D) if such agreement is terminated by the Secretary, during the 30 days thereafter (and, if an appeal of such termination is filed within such 30 days, during the period that such appeal is pending).

 

6331(k)(3) CERTAIN RULES TO APPLY. --Rules similar to the rules of --

 

6331(k)(3)(A) paragraphs (3) and (4) of subsection (i), and

 

6331(k)(3)(B) except in the case of paragraph (2)(C), paragraph (5) of subsection (i),

 

shall apply for purposes of this subsection.

 

6331(l) CROSS REFERENCES. --

 

6331(l)(1) For provisions relating to jeopardy, see subchapter A of chapter 70.

 

6331(l)(2) For proceedings applicable to sale of seized property, see section 6335.

 

6331(l)(3) For release and notice of release of levy, see section 6343.


.01 Amended by P.L. 108-357, P.L. 107-147 (technical correction), P.L. 106-554 (technical amendment), P.L. 105-206, P.L. 105-34, P.L. 100-647, P.L. 98-369, P.L. 97-248, P.L. 94-455, P.L. 92-178 and P.L. 89-719.



301.6331-1., Levy and distraint

(a) Authority to levy

 

(1) In general. --If any person liable to pay any tax neglects or refuses to pay the tax within 10 days after notice and demand, the district director to whom the assessment is charged (or, upon his request, any other district director) may proceed to collect the tax by levy. The district director may levy upon any property, or rights to property, whether real or personal, tangible or intangible, belonging to the taxpayer. The district director may also levy upon property with respect to which there is a lien provided by section 6321 or 6324 for the payment of the tax. For exemption of certain property from levy, see section 6334 and the regulations thereunder. As used in section 6331 and this section, the term "tax" includes any interest, additional amount, addition to tax, or assessable penalty, together with costs and expenses. Property subject to a Federal tax lien which has been sold or otherwise transferred by the taxpayer may be seized while in the hands of the transferee or any subsequent transferee. However, see provisions under sections 6323 and 6324(a)(2) and (b) for protection of certain transferees against a Federal tax lien. Levy may be made by serving a notice of levy on any person in possession of, or obligated with respect to, property or rights to property subject to levy, including receivables, bank accounts, evidences of debt, securities, and salaries, wages, commissions, or other compensation. A levy on a bank reaches any interest that accrues on the taxpayer's balance under the terms of the bank's agreement with the depositor during the 21-day holding period provided for in section 6332(c). Except as provided in 301.6331-1(b)(1) with regard to a levy on salary or wages, a levy extends only to property possessed and obligations which exist at the time of the levy. Obligations exist when the liability of the obligor is fixed and determinable although the right to receive payment thereof may be deferred until a later date. For example, if on the first day of the month a delinquent taxpayer sold personal property subject to an agreement that the buyer remit the purchase price on the last day of the month, a levy made on the buyer on the 10th day of the month would reach the amount due on the sale, although the buyer need not satisfy the levy by paying over the amount to the district director until the last day of the month. Similarly, a levy only reaches property in the possession of the person levied upon at the time the levy is made together with interest that accrues during the 21-day holding period provided for in section 6332(c). For example, a levy made on a bank with respect to the account of a delinquent taxpayer is satisfied if the bank surrenders the amount of the taxpayer's balance at the time the levy is made. The levy has no effect upon any subsequent deposit made in the bank by the taxpayer. Subsequent deposits may be reached only by a subsequent levy on the bank.

 

(2) Jeopardy cases. --If the district director finds that the collection of any tax is in jeopardy, he or she may make notice and demand for immediate payment of such tax and, upon failure or refusal to pay such tax, collection thereof by levy shall be lawful without regard to the 10-day period provided in section 6331(a), the 30-day period provided in section 6331(d), or the limitation on levy provided in section 6331(g)(1).

 

(3) Bankruptcy or receivership cases. --During a bankruptcy proceeding or a receivership proceeding in either a Federal or a State court, the assets of the taxpayer are in general under the control of the court in which such proceeding is pending. Taxes cannot be collected by levy upon assets in the custody of a court, whether or not such custody is incident to a bankruptcy or receivership proceeding, except where the proceeding has progressed to such a point that the levy would not interfere with the work of the court or where the court grants permission to levy. Any assets which under applicable provisions of law are not under the control of the court may be levied upon, for example, property exempt from court custody under State law or the bankrupt's earnings and property acquired after the date of bankruptcy. However, levy upon such property is not mandatory and the Government may rely upon payment of taxes in the proceeding.

 

(4) Certain types of compensation

 

(i) Federal employees. --Levy may be made upon the salary or wages of any officer or employee (including members of the Armed Forces), or elected or appointed official, of the United States, the District of Columbia, or any agency or instrumentality of either, by serving a notice of levy on the employer of the delinquent taxpayer. As used in this subdivision, the term "employer" means (a) the officer or employee of the United States, the District of Columbia, or of the agency or instrumentality of the United States or the District of Columbia, who has control of the payment of the wages, or (b) any other officer or employee designated by the head of the branch, department, agency, or instrumentality of the United States or of the District of Columbia as the party upon whom service of the notice of levy may be made. If the head of such branch, department, agency, or instrumentality designates an officer or employee other than one who has control of the payment of the wages, as the party upon whom service of the notice of levy may be made, such head shall promptly notify the Commissioner of the name and address of each officer or employee so designated and the scope or extent of his authority as such designee.

 

(ii) State and municipal employees. --Salaries, wages, or other compensation of any officer, employee, or elected or appointed official of a State or Territory, or of any agency, instrumentality, or political subdivision thereof, are also subject to levy to enforce collection of any Federal tax.

 

(iii) Seamen. --Notwithstanding the provisions of section 12 of the Seamen's Act of 1915 (38 Stat. 1169; 46 U.S.C. 601), wages of seamen, apprentice seamen, or fishermen employed on fishing vessels are subject to levy. See section 6334(c).

 

(5) Noncompetent Indians. --Solely for purposes of sections 6321 and 6331, any interest in restricted land held in trust by the United States for an individual noncompetent Indian (and not for a tribe) shall not be deemed to be property, or a right to property, belonging to such Indian.

(b) Continuing levies and successive seizures

 

(1) Continuing effect of levy on salary and wages. --A levy on salary or wages has continuous effect from the time the levy originally is made until the levy is released pursuant to section 6343. For this purpose, the term salary or wages includes compensation for services paid in the form of fees, commissions, bonuses, and similar items. The levy attaches to both salary or wages earned but not yet paid at the time of the levy, advances on salary or wages made subsequent to the date of the levy, and salary or wages earned and becoming payable subsequent to the date of the levy, until the levy is released pursuant to section 6343. In general, salaries or wages that are the subject of a continuing levy and are not exempt from levy under section 6334(a)(8) or (9), are to be paid to the district director, the service center director, or the compliance center director (director) on the same date the payor would otherwise pay over the money to the taxpayer. For example, if an individual normally is paid on the Wednesday following the close of each work week, a levy made upon his or her employer on any Monday would apply to both wages due for the prior work week and wages for succeeding work weeks as such wages become payable. In such a case, the levy would be satisfied if, on the first Wednesday after the levy and on each Wednesday thereafter until the employer receives a notice of release from levy described in section 6343, the employer pays over to the director wages that would otherwise be paid to the employee on such Wednesday (less any exempt amount pursuant to section 6334).

 

(2) Successive seizures. --Whenever any property or rights to property upon which a levy has been made are not sufficient to satisfy the claim of the United States for which the levy is made, the district director may thereafter, and as often as may be necessary, proceed to levy in like manner upon any other property or rights to property subject to levy of the person against whom such claim exists or on which there is a lien imposed by section 6321 or 6324 (or the corresponding provision of prior law) for the payment of such claim until the amount due from such person, together with all costs and expenses, is fully paid.

 

(c) Service of notice of levy by mail. --A notice of levy may be served by mailing the notice to the person upon whom the service of a notice of levy is authorized under paragraph (a)(1) of this section. In such a case the date and time the notice is delivered to the person to be served is the date and time the levy is made. If the notice is sent by certified mail, return receipt requested, the date of delivery on the receipt is treated as the date the levy is made. If, after receipt of a notice of levy, an officer or other person authorized to act on behalf of the person served signs and notes the date and time of receipt on the notice of levy, the date and time so noted will be presumed to be, in the absence of proof to the contrary, the date and time of delivery. Any person may, upon written notice to the district director having audit jurisdiction over such person, have all notices of levy by mail sent to one designated office. After such a notice is received by the district director, notices of levy by mail will be sent to the designated office until a written notice withdrawing the request or a written notice designating a different office is received by the district director.

 

(d) Effective date. --These regulations are effective December 10, 1992 .


301.6331-1., Levy and distraint

(a) Authority to levy

 

(1) In general. --If any person liable to pay any tax neglects or refuses to pay the tax within 10 days after notice and demand, the district director to whom the assessment is charged (or, upon his request, any other district director) may proceed to collect the tax by levy. The district director may levy upon any property, or rights to property, whether real or personal, tangible or intangible, belonging to the taxpayer. The district director may also levy upon property with respect to which there is a lien provided by section 6321 or 6324 for the payment of the tax. For exemption of certain property from levy, see section 6334 and the regulations thereunder. As used in section 6331 and this section, the term "tax" includes any interest, additional amount, addition to tax, or assessable penalty, together with costs and expenses. Property subject to a Federal tax lien which has been sold or otherwise transferred by the taxpayer may be seized while in the hands of the transferee or any subsequent transferee. However, see provisions under sections 6323 and 6324(a)(2) and (b) for protection of certain transferees against a Federal tax lien. Levy may be made by serving a notice of levy on any person in possession of, or obligated with respect to, property or rights to property subject to levy, including receivables, bank accounts, evidences of debt, securities, and salaries, wages, commissions, or other compensation. A levy on a bank reaches any interest that accrues on the taxpayer's balance under the terms of the bank's agreement with the depositor during the 21-day holding period provided for in section 6332(c). Except as provided in 301.6331-1(b)(1) with regard to a levy on salary or wages, a levy extends only to property possessed and obligations which exist at the time of the levy. Obligations exist when the liability of the obligor is fixed and determinable although the right to receive payment thereof may be deferred until a later date. For example, if on the first day of the month a delinquent taxpayer sold personal property subject to an agreement that the buyer remit the purchase price on the last day of the month, a levy made on the buyer on the 10th day of the month would reach the amount due on the sale, although the buyer need not satisfy the levy by paying over the amount to the district director until the last day of the month. Similarly, a levy only reaches property in the possession of the person levied upon at the time the levy is made together with interest that accrues during the 21-day holding period provided for in section 6332(c). For example, a levy made on a bank with respect to the account of a delinquent taxpayer is satisfied if the bank surrenders the amount of the taxpayer's balance at the time the levy is made. The levy has no effect upon any subsequent deposit made in the bank by the taxpayer. Subsequent deposits may be reached only by a subsequent levy on the bank.

 

(2) Jeopardy cases. --If the district director finds that the collection of any tax is in jeopardy, he or she may make notice and demand for immediate payment of such tax and, upon failure or refusal to pay such tax, collection thereof by levy shall be lawful without regard to the 10-day period provided in section 6331(a), the 30-day period provided in section 6331(d), or the limitation on levy provided in section 6331(g)(1).

 

(3) Bankruptcy or receivership cases. --During a bankruptcy proceeding or a receivership proceeding in either a Federal or a State court, the assets of the taxpayer are in general under the control of the court in which such proceeding is pending. Taxes cannot be collected by levy upon assets in the custody of a court, whether or not such custody is incident to a bankruptcy or receivership proceeding, except where the proceeding has progressed to such a point that the levy would not interfere with the work of the court or where the court grants permission to levy. Any assets which under applicable provisions of law are not under the control of the court may be levied upon, for example, property exempt from court custody under State law or the bankrupt's earnings and property acquired after the date of bankruptcy. However, levy upon such property is not mandatory and the Government may rely upon payment of taxes in the proceeding.

 

(4) Certain types of compensation

 

(i) Federal employees. --Levy may be made upon the salary or wages of any officer or employee (including members of the Armed Forces), or elected or appointed official, of the United States, the District of Columbia, or any agency or instrumentality of either, by serving a notice of levy on the employer of the delinquent taxpayer. As used in this subdivision, the term "employer" means (a) the officer or employee of the United States, the District of Columbia, or of the agency or instrumentality of the United States or the District of Columbia, who has control of the payment of the wages, or (b) any other officer or employee designated by the head of the branch, department, agency, or instrumentality of the United States or of the District of Columbia as the party upon whom service of the notice of levy may be made. If the head of such branch, department, agency, or instrumentality designates an officer or employee other than one who has control of the payment of the wages, as the party upon whom service of the notice of levy may be made, such head shall promptly notify the Commissioner of the name and address of each officer or employee so designated and the scope or extent of his authority as such designee.

 

(ii) State and municipal employees. --Salaries, wages, or other compensation of any officer, employee, or elected or appointed official of a State or Territory, or of any agency, instrumentality, or political subdivision thereof, are also subject to levy to enforce collection of any Federal tax.

 

(iii) Seamen. --Notwithstanding the provisions of section 12 of the Seamen's Act of 1915 (38 Stat. 1169; 46 U.S.C. 601), wages of seamen, apprentice seamen, or fishermen employed on fishing vessels are subject to levy. See section 6334(c).

 

(5) Noncompetent Indians. --Solely for purposes of sections 6321 and 6331, any interest in restricted land held in trust by the United States for an individual noncompetent Indian (and not for a tribe) shall not be deemed to be property, or a right to property, belonging to such Indian.

(b) Continuing levies and successive seizures

 

(1) Continuing effect of levy on salary and wages. --A levy on salary or wages has continuous effect from the time the levy originally is made until the levy is released pursuant to section 6343. For this purpose, the term salary or wages includes compensation for services paid in the form of fees, commissions, bonuses, and similar items. The levy attaches to both salary or wages earned but not yet paid at the time of the levy, advances on salary or wages made subsequent to the date of the levy, and salary or wages earned and becoming payable subsequent to the date of the levy, until the levy is released pursuant to section 6343. In general, salaries or wages that are the subject of a continuing levy and are not exempt from levy under section 6334(a)(8) or (9), are to be paid to the district director, the service center director, or the compliance center director (director) on the same date the payor would otherwise pay over the money to the taxpayer. For example, if an individual normally is paid on the Wednesday following the close of each work week, a levy made upon his or her employer on any Monday would apply to both wages due for the prior work week and wages for succeeding work weeks as such wages become payable. In such a case, the levy would be satisfied if, on the first Wednesday after the levy and on each Wednesday thereafter until the employer receives a notice of release from levy described in section 6343, the employer pays over to the director wages that would otherwise be paid to the employee on such Wednesday (less any exempt amount pursuant to section 6334).

 

(2) Successive seizures. --Whenever any property or rights to property upon which a levy has been made are not sufficient to satisfy the claim of the United States for which the levy is made, the district director may thereafter, and as often as may be necessary, proceed to levy in like manner upon any other property or rights to property subject to levy of the person against whom such claim exists or on which there is a lien imposed by section 6321 or 6324 (or the corresponding provision of prior law) for the payment of such claim until the amount due from such person, together with all costs and expenses, is fully paid.

 

(c) Service of notice of levy by mail. --A notice of levy may be served by mailing the notice to the person upon whom the service of a notice of levy is authorized under paragraph (a)(1) of this section. In such a case the date and time the notice is delivered to the person to be served is the date and time the levy is made. If the notice is sent by certified mail, return receipt requested, the date of delivery on the receipt is treated as the date the levy is made. If, after receipt of a notice of levy, an officer or other person authorized to act on behalf of the person served signs and notes the date and time of receipt on the notice of levy, the date and time so noted will be presumed to be, in the absence of proof to the contrary, the date and time of delivery. Any person may, upon written notice to the district director having audit jurisdiction over such person, have all notices of levy by mail sent to one designated office. After such a notice is received by the district director, notices of levy by mail will be sent to the designated office until a written notice withdrawing the request or a written notice designating a different office is received by the district director.

 

(d) Effective date. --These regulations are effective December 10, 1992.



301.6331-2., Procedures and restrictions on levies

(a) Notice of intent to levy

(1) In general. --Levy may be made upon the salary, wages, or other property of a taxpayer for any unpaid tax no less than 30 days after the district director, the service center director, or the compliance center director (director) has notified the taxpayer in writing of the intent to levy. The notice must be given in person, be left at the dwelling or usual place of business of the taxpayer, or be sent by registered or certified mail to the taxpayer's last known address. For further guidance regarding the definition of last known address, see 301.6212-2. The notice of intent to levy is separate from, but may be given at the same time as, the notice and demand described in 301.6331-1.

 

(2) Content of Notice. --The notice of intent to levy is to contain a brief statement in nontechnical terms including the following information --

 

(i) The Internal Revenue Code provisions and the procedures relating to levy and sale of property;

 

(ii) The administrative appeals available with respect to the levy and sale of property and the procedures relating to such appeals;

 

(iii) The alternatives available that could prevent levy on the property (including the use of an installment agreement under section 6159); and

 

(iv) The Internal Revenue Code provisions and the procedures relating to redemption of property and release of liens on property.

 (b) Uneconomical levy

 

(1) In general. --No levy may be made on property if the director estimates that the anticipated expenses with respect to the levy and sale will exceed the fair market value of the property. The estimate is to be made on an aggregate basis for all of the items that are anticipated to be seized pursuant to the levy. Generally, no levy should be made on individual items of insignificant monetary value. For the definition of fair market value, see 301.6325-1(b)(1)(i). See 301.6341-1 concerning the expenses of levy and sale.

 

(2) Time of estimate. --The estimate, which may be formal or informal, is to be made at the time of the seizure or within a reasonable period of time prior to a seizure. The estimate may be based on earlier estimates of fair market value and anticipated expenses of the same or similar property.

 

(3) Examples. --The following examples illustrate the application of this paragraph (b):

 

Example 1. A director anticipates that the taxpayer has only one item of property that can be seized and sold. This item is estimated to have a fair market value of $250.00. The director also estimates that the costs of seizure and sale will total $300.00 if this item is seized. The director is prohibited from levying on this one item of the taxpayer's property because the costs of seizure and sale are estimated to exceed the property's fair market value.

 

Example 2. The facts are the same as in Example 1 except that the director anticipates that the taxpayer has 10 items of property that can be seized and sold. Each of those items is estimated to have a fair market value of $250.00. The director also estimates that the costs of seizure and sale will total $300.00 regardless of how many of those items are seized. The director is prohibited from levying on only one item of the taxpayer's property because the costs of seizure and sale are estimated to exceed the fair market value of the single item of property. The director, however, would not be prohibited from levying on two or more items of the taxpayer's property because the aggregate fair market value of the seized property would exceed the estimated costs of seizure and sale.

 

Example 3. The taxpayer has three items of property, A, B, and C. The director anticipates that the value of items A, B, and C depends on their being sold as a unit. The director estimates that due to high anticipated costs of storing or maintaining item B prior to the sale, the aggregate fair market value of items A, B, and C will not exceed the anticipated expenses of seizure and sale if all three items are seized. Accordingly, the director is prohibited from levying on items A, B, and C.

 

Example 4. The facts are the same as in Example 3 except that the director does not anticipate that the value of items A, B, and C depends on those items being sold as a unit. If the director estimates that the aggregate fair market value of items A and C exceeds the aggregate anticipated costs of the seizure and sale of those two items, items A and C can be seized and sold. The director is prohibited from levying on item B because the high cost of storing or maintaining item B is estimated to exceed the fair market value of item B.

(c) Restriction on levy on date of appearance. --Except for continuing levies on salaries or wages described in 301.6331-1(b)(1), no levy may be made on any property of a person on the day that person, or an officer or employee of that person, is required to appear in response to a summons served for the purpose of collecting any underpayment of tax from that person. For purposes of this paragraph (c), the date on which an appearance is required is the date fixed by an officer or employee of the Internal Revenue Service pursuant to section 7605 or the date (if any) fixed as the result of a judicial proceeding instituted under sections 7604 and 7402(b) seeking the enforcement of the summons.

(d) Jeopardy. --Paragraphs (a) and (c) of this section do not apply to a levy if the director finds, for purposes of 301.6331-1(a)(2), that the collection of tax is in jeopardy.

 

(e) Effective date. --These regulations are effective December 10, 1992. [Reg. 301.6331-2.]

301.6331-3., Restrictions on levy while offers to compromise are pending

Cross-reference. --For provisions relating to the making of levies while an offer to compromise is pending, see 301.7122-1. [Reg. 301.6331-3.]


.

 


301.6331-4., Restrictions on levy while installment agreements are pending or in effect

(a) Prohibition on levy

(1) In general. --No levy may be made to collect a tax liability that is the subject of an installment agreement during the period that a proposed installment agreement is pending with the Internal Revenue Service ( IRS ), for 30 days immediately following the rejection of a proposed installment agreement, during the period that an installment agreement is in effect, and for 30 days immediately following the termination of an installment agreement. If, within the 30 days following the rejection or termination of an installment agreement, the taxpayer files an appeal with the IRS Office of Appeals, no levy may be made while the rejection or termination is being considered by Appeals. This section will not prohibit levy to collect the liability of any person other than the person or persons named in the installment agreement. (2) When a proposed installment agreement becomes pending. --A proposed installment agreement becomes pending when it is accepted for processing. The IRS may not accept a proposed installment agreement for processing following reference of a case involving the liability that is the subject of the proposed installment agreement to the Department of Justice for prosecution or defense. The proposed installment agreement remains pending until the IRS accepts the proposal, the IRS notifies the taxpayer that the proposal has been rejected, or the proposal is withdrawn by the taxpayer. If a proposed installment agreement that has been accepted for processing does not contain sufficient information to permit the IRS to evaluate whether the proposal should be accepted, the IRS will request the taxpayer to provide the needed additional information. If the taxpayer does not submit the additional information that the IRS has requested within a reasonable time period after such a request, the IRS may reject the proposed installment agreement.

 

(3) Revised proposals of installment agreements submitted following rejection. --If, following the rejection of a proposed installment agreement, the taxpayer makes a good faith revision of the proposal and submits the revision within 30 days of the date of rejection, the provisions of this section shall apply to that revised proposal.

 

(4) Exceptions. --Paragraph (a)(1) of this section shall not prohibit levy if the taxpayer files a written notice with the IRS that waives the restriction on levy imposed by this section, the IRS determines that the proposed installment agreement was submitted solely to delay collection, or the IRS determines that collection of the tax to which the installment agreement or proposed installment agreement relates is in jeopardy.

 

(b) Other actions by the IRS while levy is prohibited

 

(1) In general. --The IRS may take actions other than levy to protect the interests of the Government with regard to the liability identified in an installment agreement or proposed installment agreement. Those actions include, for example --

 

(i) Crediting an overpayment against the liability pursuant to section 6402;

 

(ii) Filing or refiling notices of Federal tax lien; and

 

(iii) Taking action to collect from any person who is not named in the installment agreement or proposed installment agreement but who is liable for the tax to which the installment agreement relates.

 

(2) Proceedings in court. --Except as otherwise provided in this paragraph (b)(2), the IRS will not refer a case to the Department of Justice for the commencement of a proceeding in court, against a person named in an installment agreement or proposed installment agreement, if levy to collect the liability is prohibited by paragraph (a)(1) of this section. Without regard to whether a person is named in an installment agreement or proposed installment agreement, however, the IRS may authorize the Department of Justice to file a counterclaim or third-party complaint in a refund action or to join that person in any other proceeding in which liability for the tax that is the subject of the installment agreement or proposed installment agreement may be established or disputed, including a suit against the United States under 28 U.S.C. 2410. In addition, the United States may file a claim in any bankruptcy proceeding or insolvency action brought by or against such person. If a person named in an installment agreement is joined in a proceeding, the United States obtains a judgment against that person, and the case is referred back to the IRS for collection, collection will continue to occur pursuant to the terms of the installment agreement.

 

(c) Statute of limitations

 

(1) Suspension of the statute of limitations on collection. --The statute of limitations under section 6502 for collection of any liability shall be suspended during the period that a proposed installment agreement relating to that liability is pending with the IRS , for 30 days immediately following the rejection of a proposed installment agreement, and for 30 days immediately following the termination of an installment agreement. If, within the 30 days following the rejection or termination of an installment agreement, the taxpayer files an appeal with the IRS Office of Appeals, the statute of limitations for collection shall be suspended while the rejection or termination is being considered by Appeals. The statute of limitations for collection shall continue to run if an exception under paragraph (a)(4) of this section applies and levy is not prohibited with respect to the taxpayer.

 

(2) Waivers of the statute of limitations on collection. --The IRS may continue to request, to the extent permissible under section 6502 and 301.6159-1, that the taxpayer agree to a reasonable extension of the statute of limitations for collection.

 

(d) Effective date. --This section is applicable on December 18, 2002 .

 

 

 

T.D. 8809 T.D. 8809

I.R.B. 1999-7, 27 (Feb. 16, 1999)

Levies: Right to hearing, notice of.

 

DEPARTMENT OF THE TREASURY

Internal Revenue Service
26 CFR Part 301
Notice and Opportunity for Hearing before Levy
AGENCY: Internal Revenue Service ( IRS ), Treasury.
ACTION: Temporary regulations.
SUMMARY: This document contains temporary regulations relating to the provision of notice to taxpayers of a right to a hearing before levy. The regulations implement certain changes made by section 3401 of the Internal Revenue Service Restructuring and Reform Act of 1998. They affect taxpayers against whose property the IRS intends to levy. The text of these regulations also serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this issue of the Federal Register.
DATES: This regulation is effective January 19, 1999.
FOR FURTHER INFORMATION CONTACT: Jerome D. Sekula (202) 622-3610 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to the Procedure and Administration Regulations (26 CFR part 301) that reflect the addition of section 6330 to the Internal Revenue Code made by section 3401 of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA).

Prior to January 1, 1983, the IRS was only required to notify a taxpayer of its intention to levy in the case of proposed levies on salary or wages. Section 6331(d) was amended as a part of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The TEFRA amendment required the IRS to give a taxpayer a notice of its intention to levy, in non-jeopardy situations, before any levy was made upon the salary, wages, or other property of the taxpayer. The legislative history of the TEFRA amendment recognized that, although a single notice of intent to levy relating to all property would be sufficient, the IRS was not precluded from sending multiple notices of intention to levy.

Under section 6331(a), the IRS may levy upon a taxpayer's property and rights to property if a taxpayer fails to pay a tax liability. Exemptions from levy are provided for certain property under section 6334(a). The first step toward levy generally occurs when the IRS provides a taxpayer with a written notice and demand for payment. Under section 6303, a notice and demand is a notice which states that the tax has been assessed and demands that payment be made. If, in non-jeopardy situations, the taxpayer fails to pay the tax within 10 days after notice and demand, the IRS may seize a taxpayer's property or rights to property 30 days after sending the taxpayer a notice required under section 6331(d), called a Notice of Intent to Levy. Although the notice and demand and the Notice of Intent to Levy may be combined and sent at the same time under Treas. Reg. 301.6331-2(a)(1), under current practice these two notices are usually sent separately. Generally, the notice and demand is sent first and, as the second step in the levy process, the Notice of Intent to Levy is sent at a later time. The IRS is permitted to proceed with immediate seizure of a taxpayer's property or rights to property without regard to to the 10-day waiting period if it determines that the collection of the tax is in jeopardy.

Under section 6331(d), the Notice of Intent to Levy must contain a brief statement, in simple, nontechnical terms, that sets forth (A) the statutory provisions relating to the levy and sale of property, (B) the procedures applicable to the levy and sale of property, (C) the administrative appeals available to the taxpayer with respect to levy and sale and the procedures relating to those appeals, (D) the alternatives available to taxpayers that could prevent levy on the property (including installment agreements), (E) the statutory provisions relating to redemption of property and the release of liens on property, and (F) the procedures applicable to the redemption of property and the release of a lien on property. The Notice of Intent to Levy must be given in person, left at the taxpayer's dwelling or usual place of business, or sent by registered or certified mail to the taxpayer's last known address.

Prior to January 19, 1999 , the IRS generally complied with the requirements of section 6331(d) by giving the taxpayer a Final Notice of Intent to Levy, and enclosing certain IRS publications which explain the law, IRS levy and redemption procedures, administrative appeal processes and procedures, and various collection alternatives.

Section 6330 provides that, except when the Secretary finds that collection of the tax is in jeopardy or a levy is issued to collect State tax refunds due to the taxpayer, no levy may be made on or after January 19, 1999 , unless the Secretary notifies the taxpayer in writing of a right to a hearing before the IRS Office of Appeals (Appeals) with respect to the unpaid tax for the tax period. When the Secretary has found jeopardy exists and in cases where a levy is made on a State tax refund, the taxpayer will be given notice of a right to, and the opportunity for, a hearing within a reasonable time after the levy action has actually occurred.

Except when it determines that collection of the tax is in jeopardy or it levies on State tax refunds, the IRS is prohibited from levying upon the taxpayer's property or rights to property until 30 days after providing the taxpayer with the notice of a right to a hearing before Appeals. If the taxpayer requests such a hearing, the IRS is, in the absence of jeopardy, prohibited from levying upon the taxpayer's property until the determination reached by Appeals becomes final.

In order to implement the provisions of section 6330, the IRS is going to modify the procedures it follows leading up to the issuance of a levy. In the absence of a determination that collection of the taxes is in jeopardy, the IRS will continue to provide a number of notices to a taxpayer before levying upon the taxpayer's property.

Under the procedures the IRS is adopting to implement section 6330, the levy process will continue to begin with issuance to the taxpayer of a written notice and demand for payment. Absent a jeopardy determination, a taxpayer who fails to pay the tax specified in the notice and demand within 10 days after notice and demand may, in addition to other notices such as the annual notice of tax delinquency required under section 7524, be sent an Urgent Notice. The Urgent Notice will inform the taxpayer that the IRS may levy upon a taxpayer's State tax refund after 30 days from the date of that notice. This Urgent Notice will include all information required under section 6331(d) and will constitute the notice required under that section. Accordingly, the Urgent Notice will also begin the ten-day period leading to an increase in the failure to pay penalty prescribed by section 6651(d).

These temporary regulations implement the provisions of section 6330 and thus set forth the procedures the IRS will follow regarding notice to taxpayers of a right to a hearing before Appeals, the procedures that will be followed at those hearings, judicial review of the determinations reached at the hearings, and the suspensions of various periods of limitation as a result of a timely request for a hearing. The legislative history accompanying RRA also explains that Congress intended the IRS to grant an equivalent hearing to taxpayers who do not request a hearing under section 6330 within the 30-day period following the date of notification. H. Conf. Rep. No. 599, 105th Cong., 2d Sess. 266 (1998). These temporary regulations set forth the procedural requirements and rules that will govern the conduct of such an equivalent hearing.

Explanation of Provisions

The temporary regulations provide that, except in the case of jeopardy levies or levies on State tax refunds, the IRS must notify the taxpayer of its intention to levy prior to issuing a levy. The notification under section 6330 may be given in person, left at the taxpayer's dwelling or usual place of business, or sent to the taxpayer by certified or registered mail, return receipt requested, to the taxpayer's last known address at least 30 days prior to the first proposed levy action with respect to the amount of the unpaid tax for the tax period. The temporary regulations also provide procedures to be followed in the event the notification, if mailed, is not mailed to the taxpayer's last known address. In jeopardy situations and in cases where a levy is made on a State tax refund, notification to the taxpayer of a right to a hearing is not required to be given until the levy action has actually occurred. The temporary regulations set forth the procedures to be followed for making the required pre-levy and post-levy notifications.

Both such notifications must (A) set forth the amount of unpaid tax, (B) notify the taxpayer of the right to request a hearing within the 30-day period that commences the day after the date of notification, (C) indicate, as appropriate, that the IRS has levied or plans to levy, and (D) describe the rights of the taxpayer with respect to such action, including a brief statement which explains (1) the provisions of the Internal Revenue Code (Code) relating to levy and sale of property, (2) the procedures applicable to the levy and sale of property under the Code, (3) the administrative appeals available to the taxpayer with respect to such levy and sale and the procedures relating to such appeals, (4) the alternatives available to taxpayers which might forestall future levies on property (including installment agreements under section 6159), and (5) the provisions of the Code and procedures relating to redemption of property and release of liens on property.

Unless the taxpayer withdraws the request that Appeals conduct a hearing when the taxpayer has made a timely request for a collection due process hearing, Appeals will hold one section 6330 collection due process hearing (CDP hearing) with respect to the tax and tax period or periods specified in the collection due process notice (CDP Notice). The taxpayer is entitled to have a hearing conducted by an Appeals officer who has had no prior involvement with the unpaid tax that is the subject of the hearing. This requirement, however, can be waived by the taxpayer in writing. A taxpayer may seek judicial review of an Appeals determination issued with respect to a CDP hearing. Hearings with respect to levies may be held in conjunction with hearings under section 6320, involving liens.

If the taxpayer timely requests a CDP hearing, the periods of limitation relating to collection after assessment, relating to criminal prosecution, and relating to suits are suspended until the suspension ends as a result of the taxpayer's withdrawal of the request for a CDP hearing or until the determination reached at the CDP hearing becomes final by the expiration of the time for seeking review or reconsideration before the appropriate court. Prior to issuance of the Appeals determination, the Appeals officer must verify that all legal and administrative requirements pertaining to the proposed levy have been met. The temporary regulations further discuss the types of issues that may or may not be raised at the CDP hearing. The types of issues that may be raised at the hearing include appropriate spousal defenses; challenges to the appropriateness of collection actions; collection alternatives; and challenges to the existence or amount of the liability specified in the CDP Notice. An issue may not be raised at the CDP hearing if the issue was raised and considered at a previous hearing under section 6320 or any other previous administrative or judicial proceeding in which the taxpayer meaningfully participated. Challenges to the existence or amount of the tax liability specified in the CDP Notice may be raised only if the taxpayer did not receive a statutory notice of deficiency for such liability or did not otherwise have an opportunity to dispute such liability.

Following the CDP hearing, the Appeals officer will issue a Notice of Determination, which can be appealed to the United States Tax Court or a district court of the United States by filing an appropriate pleading with the court that has jurisdiction over the type of tax involved within 30 days of the date of the determination. The temporary regulations discuss the content of the Notice of Determination and the rules for obtaining judicial review. The temporary regulations also provide guidance as to the extent to which the Appeals officer will retain jurisdiction with respect to the determination.

Lastly, the temporary regulations provides rules and procedures with respect to the administrative hearing (referred to as an "equivalent hearing") the IRS will provide to taxpayers who do not timely request a hearing under section 6330.

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6) refer to the Special Anayses section of the preamble to the cross reference notice of proposed rulemaking published in the Proposed Rules section of this issue of the Federal Register. Pursuant to section 7805(f) of the Internal Revenue Code, this temporary regulation will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Drafting Information

The principal author of this regulation is Jerome D. Sekula, Office of Assistant Chief Counsel (General Litigation). However, other personnel from the IRS and Treasury Department participated in its development.

* * * * *

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 301.6330 -1T is added under the undesignated centerheading "Seizure of Property for Collection of Taxes to read as follows:

301.6330-IT Notice and opportunity for hearing prior to levy (temporary).

(a) Notification--(1) In general. Except as specified in paragraph (a)(2) of this section, the district directors, directors of service centers, and the Assistant Commissioner (International), or their successors, are required to provide persons upon whose property or rights to property the IRS intends to levy on or after January 19, 1999 , notice of that intention and to give them the right to, and the opportunity for, a pre-levy Collection Due Process hearing (CDP hearing) with the Internal Revenue Service Office of Appeals (Appeals). This Collection Due Process Hearing Notice (CDP Notice) must be given in person, left at the dwelling or usual place of business of such person, or sent by certified or registered mail, return receipt requested, to such person's last known address.

(2) Exceptions-- (i) State tax refunds. Section 6330 does not require the IRS to provide the taxpayer a notification of the taxpayer's right to a CDP hearing prior to issuing a levy to collect State tax refunds owing to the taxpayer. However, the district director, the service center director, and the Assistant Commissioner (International), or their successors, are required to give notice of the right to, and the opportunity for, a CDP hearing with Appeals with respect to the tax liability for the tax period for which the levy on the State tax refund was made on or after January 19, 1999 , within a reasonable time after the levy has occurred. The notification required to be given following a levy on a State tax refund is referred to as a post-levy CDP Notice.

(ii) Jeopardy. Section 6330 does not require the IRS to provide the taxpayer a notification of the taxpayer's right to a CDP hearing prior to levy when there has been a determination that collection of the tax is in jeopardy. However, the district director, the service center director, and the Assistant Commissioner (International), or their successors, are required to provide notice of the right to, and the opportunity for, a CDP hearing with Appeals to the taxpayer with respect to any such levy issued on or after January 19, 1999 , within a reasonable time after the levy has occurred. The notification required to be given following a jeopardy levy is also referred to as post-levy CDP Notice.

(3) Questions and answers. The questions and answers illustrate the provisions of this paragraph (a) as follows:

Q-A1. Who is the "person" to be notified under section 6330?

A-A1. Under section 6330(a)(1), a pre-levy or post-levy CDP Notice is only required to be given to the person whose property or right to property is intended to be levied upon, or, in the case of a levy made on a State tax refund or in the case of a jeopardy levy, the person whose property or right to property was levied upon. The person described in section 6330(a)(1) is the same person described in section 6331(a). Pursuant to section 6331(a), notice is to be given to the person liable to pay the tax due after notice and demand who refuses or neglects to pay (hereinafter referred to as the taxpayer).

Q-A2. Will the IRS notify a known nominee of, a person holding property of, or a person who holds property subject to a lien with respect to the taxpayer of its intention to issue a levy?

A-A2. No. Such a person is not the person described in section 6331(a), but such persons have other remedies. See A-B5 of this paragraph (a)(3).

Q-A3. Will the IRS give notification for each tax and tax period it intends to include or has included in a levy issued on or after January 19, 1999 ?

A-A3. Yes. The notification of intent to levy or of the issuance of a jeopardy or State tax refund levy will specify each tax and tax period that will be or was included in the levy.

Q-A4. Will the IRS give notification to a taxpayer with respect to levies for a tax and tax period issued on or after January 19, 1999 , even though the IRS had issued a levy prior to January 19, 1999 , with respect to the same tax and tax period?

A-A4. Yes. The IRS will provide appropriate pre-levy or post-levy notification to a taxpayer regarding the first levy it intends to issue or has issued on or after January 19, 1999 , with respect to a tax and tax period, even though it had issued a levy with respect to that same tax and tax period prior to January 19, 1999 .

Q-A5. When will the IRS provide this notice?

A-A5. Pursuant to section 6330(a)(1), beginning January 19, 1999 , the IRS will give a pre-levy CDP Notice to the taxpayer of its intent to levy on property or rights to property, other than State tax refunds and in jeopardy levy situations, at least 30 days prior to the first such levy with respect to a tax and tax period. If the taxpayer has not received a pre-levy CDP Notice and the IRS levies on a State tax refund or issues a jeopardy levy on or after January 19, 1999 , the IRS will provide a post-levy CDP Notice to the taxpayer within a reasonable time after that levy.

Q-A6. What must the pre-levy CDP Notice include?

A-A6. Pursuant to section 6330(a)(3), the notification must include, in simple and nontechnical terms:

(i) The amount of the unpaid tax.

(ii) Notification of the right to a hearing.

(iii) A statement that the IRS intends to levy.

(iv) The taxpayer's rights with respect to the levy action, including a brief statement that sets forth--

(A) The statutory provisions relating to the levy and sale of property;

(B) The procedures applicable to the levy and sale of property;

(C) The administrative appeals available to the taxpayer with respect to levy and sale and the procedures relating to those appeals;

(D) The alternatives available to taxpayers that could prevent levy on the property (including installment agreements);

(E) The statutory provisions relating to redemption of property and the release of liens on property; and

(F) The procedures applicable to the redemption of property and the release of liens on property.

Q-A7. What must the post-levy CDP Notice include?

A-A7. Pursuant to section 6330(a)(3), the notification must include, in simple and nontechnical terms:

(i) The amount of the unpaid tax.

(ii) Notification of the right to a hearing.

(iii) A statement that the IRS has levied upon the taxpayer's State tax refund or has made a jeopardy levy on property or rights to property of the taxpayer, as appropriate.

(iv) The taxpayer's rights with respect to the levy action, including a brief statement that sets forth--

(A) The statutory provisions relating to the levy and sale of property;

(B) The procedures applicable to the levy and sale of property;

(C) The administrative appeals available to the taxpayer with respect to levy and sale and the procedures relating to those appeals;

(D) The alternatives available to taxpayers that could prevent any further levies on the taxpayer's property (including installment agreements);

(E) The statutory provisions relating to redemption of property and the release of liens on property; and

(F) The procedures applicable to the redemption of property and the release of liens on property.

Q-A8. How will this pre-levy or post-levy notification be accomplished?

A-A8. (i) The IRS will notify the taxpayer by means of a pre-levy CDP Notice or a post-levy CDP Notice, as appropriate. The additional information IRS is required to provide, together with Form 12153, Request for a Collection Due Process Hearing, will be included with that Notice. The IRS may effect delivery of a pre-levy CDP Notice (and accompanying materials) in one of three ways:

(A) By delivering the notice personally to the taxpayer.

(B) By leaving the notice at the taxpayer's dwelling or usual place of business.

(C) By mailing the notice to the taxpayer at the taxpayer's last known address by certified or registered mail, return receipt requested.

(ii) The IRS may effect delivery of a post-levy CDP Notice (and accompanying materials) in one of three ways:

(A) By delivering the notice personally to the taxpayer.

(B) By leaving the notice at the taxpayer's dwelling or usual place of business.

(C) By mailing the notice to the taxpayer at the taxpayer's last known address by certified or registered mail.

Q-A9. What are the consequences if the taxpayer does not receive or accept the notification which was properly left at the taxpayer's dwelling or usual place of business, or properly sent by certified or registered mail, return receipt requested, to the taxpayer's last known address?

A-A9. Notification properly sent to the taxpayer's last known address or left at the taxpayer's dwelling or usual place of business is sufficient to start the 30-day period within which the taxpayer may request a CDP hearing. Actual receipt is not a prerequisite to the validity of the notice.

Q-A10. What if the taxpayer does not receive the CDP Notice because the IRS did not send that notice by certified or registered mail to the taxpayer's last known address, or failed to leave it at the dwelling or usual place of business of the taxpayer, and the taxpayer fails to request a CDP hearing with Appeals within the 30-day period commencing the day after the date of the CDP Notice?

A-A10. When the IRS determines that it failed properly to provide a taxpayer with a CDP Notice, it will promptly provide the taxpayer with a substitute CDP Notice and provide the taxpayer with an opportunity to request a CDP hearing.

(4) Examples. The following examples illustrate the principles of this paragraph (a):

Example 1. Prior to January 19, 1999 , the IRS issues a continuous levy on a taxpayer's wages and a levy on that taxpayer's fixed right to future payments. The IRS is not required to release either levy on or after January 19, 1999 , until the requirements of section 6343(a)(1) are met. The taxpayer is not entitled to a CDP Notice or a CDP hearing under section 6330 with respect to either levy because both levy actions were initiated prior to January 19, 1999 .

Example 2. The same facts as in Example 1, except the IRS intends to levy upon a taxpayer's bank account on or after January 19, 1999 . The taxpayer is entitled to a pre-levy CDP Notice with respect to this proposed new levy.

(b) Entitlement to a CDP hearing--(1) In general. A taxpayer is entitled to one CDP hearing with respect to the tax and tax period covered by the pre-levy or post-levy CDP Notice provided the taxpayer. The taxpayer must request such a hearing within the 30-day period commencing on the day after the date of the CDP Notice.

(2) Questions and answers. The questions and answers illustrate the provisions of this paragraph (b) as follows:

Q-B1. Is the taxpayer entitled to a CDP hearing where a levy for State tax refunds is served on or after January 19, 1999 , even though the IRS had previously served other levies prior to January 19, 1999 , seeking to collect the taxes owed for the same period?

A-B1. Yes. The taxpayer is entitled to a CDP hearing under section 6330 for the tax and tax period set forth in such a levy issued on or after January 19, 1999 .

Q-B2. Is the taxpayer entitled to a CDP hearing when the IRS , more than 30 days after issuance of a CDP Notice with respect to a tax period, provides subsequent notice to that taxpayer that it intends to levy on property or rights to property of the taxpayer for the same tax and tax period shown on the CDP Notice?

A-B2. No. Under section 6330, only the first pre-levy or post-levy Notice with respect to liabilities for a tax and tax period constitutes a CDP Notice. If the taxpayer does not timely. request a CDP hearing with Appeals following that first notification, the taxpayer foregoes the right to a CDP hearing with Appeals and judicial review of Appeals's determination with respect to collection activity relating to that tax and tax period. The IRS generally provides additional notices or reminders (reminder notifications) to the taxpayer of its intent to levy when no collection action has occurred within 180 days of a proposed levy. Under such circumstances a taxpayer, however, may request an equivalent hearing as described in paragraph (i) of this section.

Q-B3. When the IRS provides a taxpayer with a substitute CDP Notice and the taxpayer timely requests a CDP hearing, is the taxpayer entitled to a CDP Hearing before Appeals?

A-B3. Yes. Unless the taxpayer provides the IRS a written withdrawal of the request that Appeals conduct a CDP hearing, the taxpayer is entitled to a CDP hearing before Appeals. Following the hearing, Appeals will issue a Notice of Determination, and the taxpayer is entitled to seek judicial review of that Notice of Determination.

Q-B4. If the IRS sends a second CDP Notice under section 6330 (other than a substitute CDP Notice) for a tax period and with respect to an amount of unpaid tax for which a section 6330 CDP Notice was previously sent, is the taxpayer entitled to a second section 6330 CDP hearing?

A-B4. No. The taxpayer is entitled to only one CDP hearing under section 6330 with respect to the tax and tax period. The taxpayer must request the CDP hearing within 30 days of the date of the first CDP Notice provided for that tax and tax period.

Q-B5. Will the IRS give pre-levy or post-levy CDP Notices to known nominees of, persons holding property of, or persons holding property subject to a lien with respect to the taxpayer?

A-B5. No. Such person is not the person described in section 6331(a) and is, therefore, not entitled to a CDP hearing or an equivalent hearing (as discussed in paragraph (i) of this section). Such person, however, may seek reconsideration by the IRS office collecting the tax, assistance from the National Taxpayer Advocate, or an administrative hearing before Appeals under its Collection Appeals Program. However, any such administrative hearing would not be a CDP hearing under section 6330 and any determination or decision resulting from the hearing would not be subject to judicial review.

(c) Requesting a CDP hearing--(1) In general. Where a taxpayer is entitled to a CDP hearing under section 6330, such a hearing must be requested during the 30-day period that commences that day after the date of the CDP Notice.

(2) Questions and answers. The questions and answers illustrate the provisions of this paragraph (c) as follows:

Q-C1. What must a taxpayer do to obtain a CDP hearing?

A-C1. (i) The taxpayer must make a request in writing for a CDP hearing. A written request in any form which requests a CDP hearing will be acceptable. The request must include the taxpayer's name, address, and daytime telephone number, and must be signed by the taxpayer or the taxpayer's authorized representative and dated. Included with the CDP Notice will be a Form 12153, Request for a Collection Due Process Hearing, that can be used by the taxpayer in requesting a CDP hearing. The Form 12153 requests the following information:

(A) The taxpayer's name, address, daytime telephone number, and taxpayer identification number ( SSN or TIN ).

(B) The type of tax involved.

(C) The tax period at issue.

(D) A statement that the taxpayer requests a hearing with Appeals concerning the proposed collection activity.

(E) The reason or reasons why the taxpayer disagrees with the proposed collection action.

(ii) Taxpayers are encouraged to use a Form 12153 in requesting a CDP hearing so that such a request can be readily identified and forwarded to Appeals. Taxpayers may obtain a copy of Form 12153 by contacting the IRS office that issued the CDP Notice or by calling, toll free, 1-800-829-3676 .

Q-C2. Must the request for the CDP hearing be in writing?

A-C2. Yes. There are several reasons why the request for a CDP hearing must be in writing. First, the filing of a timely request for a CDP hearing is the first step in what may result in a court proceeding. A written request will provide proof that the CDP hearing was requested and thus permit the court to verify that it has jurisdiction over any subsequent appeal of the Notice of Determination issued by Appeals. In addition, the receipt of the written request will establish the date on which the periods of limitation under section 6502 (relating to collection after assessment), section 6531 (relating to criminal prosecutions), and section 6532 (relating to suits) are suspended as a result of the CDP hearing and any judicial appeal. Moreover, because the IRS anticipates that taxpayers will contact the IRS office that issued the CDP Notice for further information, for help in filling out Form 12153, or in an attempt to resolve their liabilities prior to going through the CDP hearing process, the requirement of a written request should help to prevent any misunderstanding as to whether a CDP hearing has been requested. If the information requested on Form 12153 is furnished by the taxpayer, the written request will also help to establish the issues for which the taxpayer seeks a determination by Appeals.

Q-C3. When must a taxpayer request a CDP hearing with respect to a CDP Notice issued under section 6330?

A-C3. A taxpayer must submit a written request for a CDP hearing with respect to a CDP Notice issued under section 6330 within the 30-day period commencing the day after the date of the CDP Notice. This period is slightly different from the period allowed taxpayers to submit a written request for a CDP hearing with respect to a CDP Notice issued under section 6320. For a CDP Notice issued under section 6320, a taxpayer must submit a written request for a CDP hearing within the 30-day period commencing the day after the end of the five business day period following the filing of the notice of federal tax lien (NFTL).

Q-C4. How will the timeliness of a taxpayer's written request for a CDP hearing be determined?

A-C4. The rules under section 7502 and the regulations thereunder and section 7503 and the regulations thereunder will apply to determine the timeliness of the taxpayer's request for a CDP hearing, if properly transmitted and addressed as provided in A-C6 of this paragraph (c)(2).

Q-C5. Is the 30-day period within which a taxpayer must make a request for a CDP hearing extended because the taxpayer resides outside the United States ?

A-C5. No. Section 6330 does not make provision for such a circumstance. Accordingly, all taxpayers who want a CDP hearing under section 6330 must request such a hearing within the 30-day period commencing the day after the date of the CDP Notice.

Q-C6. Where should the written request for a CDP hearing be sent?

A-C6. The written request for a CDP hearing should be filed with the IRS office that issued the CDP Notice at the address indicated on the CDP Notice. If the address of that office is not known, the request may be sent to the District Director serving the district of the taxpayer's residence or principal place of business. If the taxpayer does not have a residence or principal place of business in the United States , the request may be sent to the Director, Philadelphia Service Center .

Q-C7. What will happen if the taxpayer does not request a section 6330 CDP hearing in writing within the 30-day period commencing on the day after the date of the CDP Notice?

A-C7. If the taxpayer does not request a CDP hearing with Appeals within the 30-day period commencing the day after the date of the CDP Notice, the taxpayer will forego the right to a CDP hearing under section 6330 with respect to the tax and tax period or periods shown on the CDP Notice. In addition, the IRS will be free to pursue collection action at the conclusion of the 30-day period following the date of the CDP Notice. The taxpayer may, however, request an equivalent hearing. See paragraph (i) of this section.

Q-C8. When must a taxpayer request a CDP hearing with respect to a substitute CDP Notice?

A-C8. A CDP hearing with respect to a substitute CDP Notice must be requested in writing by the taxpayer prior to the end of the 30-day period commencing the day after the date of the substitute CDP Notice.

Q-C9. Can taxpayers attempt to resolve the matter of the proposed levy with an officer or employee of the IRS office collecting the tax liability stated on the CDP Notice either before or after requesting a CDP hearing?

A-C9. Yes. Taxpayers are encouraged to discuss their concerns with the IRS office collecting the tax, either before or after they request a CDP hearing. If such a discussion occurs before a request is made for a CDP hearing, the matter may be resolved without the need for Appeals consideration. However, these discussions do not suspend the running of the 30-day period within which the taxpayer is required to request a CDP hearing, nor do they extend that 30-day period. If discussions occur after the request for a CDP hearing is filed and the taxpayer resolves the matter with the IRS office collecting the tax, the taxpayer may withdraw in writing the request that a CDP hearing be conducted by Appeals. The taxpayer can also waive in writing some or all of the requirements regarding the contents of the Notice of Determination.

(d) Conduct of CDP hearing--(1) In general. If a taxpayer requests a CDP hearing under section 6330(a)(3)(B) (and does not withdraw that request), the CDP hearing will be held with Appeals. The taxpayer is entitled to only one CDP hearing under section 6330 with respect to the tax and tax period or periods shown on the CDP Notice. To the extent practicable, the CDP hearing requested under section 6330 will be held in conjunction with any CDP hearing the taxpayer requests under section 6320. A CDP hearing will be conducted by an employee or officer of Appeals who has had no involvement with respect to the tax for the tax period or periods covered by the hearing prior to the first CDP hearing under section 6320 or section 6330, unless the taxpayer waives that requirement.

(2) Questions and answers. The questions and answers illustrate the provisions of this paragraph (d) as follows:

Q-D1. Under what circumstances can a taxpayer receive more than one CDP hearing with respect to a tax period?

A-D1. The taxpayer may receive more than one CDP hearing with respect to a tax period where the tax involved is a different type of tax (for example, an employment tax liability, where the original CDP hearing for the tax period involved an income tax liability), or where the same type of tax for the same period is involved, but where the amount of the tax has changed as a result of an additional assessment of tax for that period or an additional accuracy-related or filing delinquency penalty has been assessed. The taxpayer is not entitled to another CDP hearing if the additional assessment represents accruals of interest or accruals of penalties.

Q-D2. Will a CDP hearing with respect to one tax period be combined with a CDP hearing with respect to another tax period?

A-D2. To the extent practicable, a hearing with respect to one tax period shown on a CDP Notice will be combined with any and all other hearings to which the taxpayer may be entitled with respect to other tax periods shown on the CDP Notice.

Q-D3. Will a CDP hearing under section 6330 be combined with a CDP hearing under section 6320?

A-D3. To the extent it is practicable, a CDP hearing under section 6330 will be held in conjunction with a CDP hearing under section 6320.

Q-D4. What is considered to be prior involvement by an employee or officer of Appeals with respect to the tax and tax period or periods involved in the hearing?

A-D4. Prior involvement by an employee or officer of Appeals includes participation or involvement in an Appeals hearing (other than a CDP hearing held under either section 6320 or section 6330) that the taxpayer may have had with respect to the tax and tax period shown on the CDP Notice.

Q-D5. How can a taxpayer waive the requirement that the officer or employee of Appeals had no prior involvement with respect to the tax and tax period or periods?

A-D5. The taxpayer must sign a written waiver.

(e) Matters considered at CDP hearing--(1) In general. Appeals has the authority to determine the validity, sufficiency, and timeliness of any CDP Notice given by the IRS and of any request for a CDP hearing that is made by a taxpayer. Prior to issuance of a determination, the hearing officer is required to obtain verification from the IRS office collecting the tax that the requirements of any applicable law or administrative procedure have been met. The taxpayer may raise any relevant issue relating to the unpaid tax at the hearing, including appropriate spousal defenses, challenges to the appropriateness of the proposed collection action, and offers of collection alternatives. The taxpayer also may raise challenges to the existence or amount of the tax liability for any tax period shown on the CDP Notice if the taxpayer did not receive a statutory notice of deficiency for that tax liability or did not otherwise have an opportunity to dispute that tax liability. Finally, the taxpayer may not raise an issue that was raised and considered at a previous CDP hearing under section 6320 or in any other previous administrative or judicial proceeding if the taxpayer participated meaningfully in such hearing or proceeding. Taxpayers will be expected to provide all relevant information requested by Appeals, including financial statements, for its consideration of the facts and issues involved in the hearing.

(2) Spousal defenses. A taxpayer may raise any appropriate spousal defenses at a CDP hearing. To claim a spousal defense under section 6015, the taxpayer must do so in writing according to rules prescribed by the Secretary. Spousal defenses raised under section 6015 in a CDP hearing are governed in all respects by the provisions of section 6015 and the procedures prescribed by the Secretary thereunder.

(3) Questions and answers. The questions and answers illustrate the provisions of this paragraph (e) as follows:

Q-E1. What factors will Appeals consider in making its determination?

A-E1. Appeals will consider the following matters in making its determination:

(i) Whether the IRS met the requirements of any applicable law or administrative procedure.

(ii) Any issues appropriately raised by the taxpayer relating to the unpaid tax.

(iii) Any appropriate spousal defenses raised by the taxpayer.

(iv) Any challenges made by the taxpayer to the appropriateness of the proposed collection action.

(v) Any offers by the taxpayer for collection alternatives.

(vi) Whether the proposed collection action balances the need for the efficient collection of taxes and the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary.

Q-E2. When is a taxpayer entitled to challenge the existence or amount of the tax liability specified in the CDP Notice?

A-E2. A taxpayer is entitled to challenge the existence or amount of the tax liability specified in the CDP Notice if the taxpayer did not receive a statutory notice of deficiency for such liability or did not otherwise have an opportunity to dispute such liability. Receipt of a statutory notice of deficiency for this purpose means receipt in time to petition the Tax Court for a redetermination of the deficiency asserted in the notice of deficiency. An opportunity to dispute a liability includes a prior opportunity for a conference with Appeals that was offered either before or after the assessment of the liability.

Q-E3. Are spousal defenses subject to the limitations imposed under section 6330(c)(2)(B) on a taxpayer's right to challenge the tax liability specified in the CDP Notice at a CDP hearing?

A-E3. No. The limitations imposed under section 6330(c)(2)(B) do not apply to spousal defenses. A spousal defense raised under section 6015 is governed by that section; therefore any limitations under section 6015 will apply.

Q-E4. May a taxpayer raise at a CDP hearing a spousal defense under section 6015 if that defense was raised and considered in a prior judicial proceeding that has become final?

A-E4. No. A taxpayer is precluded by limitations under section 6015 from raising a spousal defense under section 6015 in a CDP hearing under these circumstances.

Q-E5. What collection alternatives are available to the taxpayer?

A-E5. Collection alternatives would include, for example, a proposal to withhold the proposed or future collection action in circumstances that will facilitate the collection of the tax liability, an installment agreement, an offer-in-compromise, the posting of a bond, or the substitution of other assets.

Q-E6. What issues may a taxpayer raise in a CDP hearing under section 6330 if he previously received a notice under section 6320 with respect to the same tax and tax period and did not request a CDP hearing with respect to that notice?

A-E6. The taxpayer may raise appropriate spousal defenses, challenges to the appropriateness of the proposed collection action, and offers of collection alternatives. The existence or amount of the tax liability for the tax for the tax period shown in the CDP Notice may be challenged only if the taxpayer did not already have an opportunity to dispute that tax liability. Where the taxpayer previously received a CDP Notice under section 6320 with respect to the same tax and tax period and did not request a CDP hearing with respect to that earlier CDP Notice, the taxpayer already had an opportunity to dispute the existence or amount of the underlying tax liability.

Q-E7. How will Appeals issue its determination?

A-E7. (i) Taxpayers will be sent a dated Notice of Determination by certified or registered mail. The Notice of Determination will set forth Appeals's findings and decisions:

(A) It will state whether the IRS met the requirements of any applicable law or administrative procedure.

(B) It will resolve any issues appropriately raised by the taxpayer relating to the unpaid tax.

(C) It will include a decision on any appropriate spousal defenses raised by the taxpayer.

(D) It will include a decision on any challenges made by the taxpayer to the appropriateness of the collection action.

(E) It will respond to any offers by the taxpayer for collection alternatives.

(F) It will address whether the proposed collection action represents a balance between the need for the efficient collection of taxes and the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary.

(ii) The Notice of Determination will also set forth any agreements that Appeals reached with the taxpayer, any relief given the taxpayer, and any actions the taxpayer and/or the IRS are required to take. Lastly, the Notice of Determination will advise the taxpayer of his right to seek judicial review within 30 days of the date of the Notice of Determination.

(iii) Because taxpayers are encouraged to discuss their concerns with the IRS office collecting the tax or filing the NFTL, certain matters that might have been raised at a CDP hearing may be resolved without the need for Appeals consideration. Unless as a result of these discussions, the taxpayer agrees in writing to withdraw the request that Appeals conduct a CDP hearing, Appeals will still issue a Notice of Determination, but the taxpayer can waive in writing Appeals's consideration of some or all of the matters it would otherwise consider in making its determination.

Q-E8. Is there a time limit on the CDP hearings or on when Appeals must issue a Notice of Determination?

A-E8. No. Appeals will, however, attempt to conduct CDP hearings as expeditiously as possible.

Q-E9. Why is the Notice of Determination and its date important?

A-E9. The Notice of Determination will set forth Appeals's findings and decisions with respect to the matters set forth in A-E1 of this paragraph (e)(3). The date of the Notice of Determination establishes the beginning date of the 30-day period within which the taxpayer is permitted to seek judicial review of Appeals's determination.

(4) Examples. The following examples illustrate the principles of this paragraph (e).

Example 1. The IRS sends a statutory notice of deficiency to the taxpayer at his last known address asserting a deficiency for the tax year 1995. The taxpayer receives the notice of deficiency in time to petition the Tax Court for a redetermination of the asserted deficiency. The taxpayer does not timely file a petition with the Tax Court. The taxpayer is therefore precluded from challenging the existence or amount of the tax liability in a subsequent CDP hearing.

Example 2. Same facts as in Example 1, except the taxpayer does not receive the notice of deficiency in time to petition the Tax Court. The taxpayer is not, therefore, precluded from challenging the existence or amount of the tax liability in a subsequent CDP hearing.

Example 3. The IRS properly assesses a trust fund recovery penalty against the taxpayer. The IRS offers the taxpayer the opportunity for a conference at which the taxpayer would have the opportunity to dispute the assessed liability. The taxpayer declines the opportunity to participate in such a conference. The taxpayer is precluded from challenging the existence or amount of the tax liability in a subsequent CDP hearing.

(f) Judicial review of Notice of Determination--(1) In general. Unless the taxpayer provides the IRS a written withdrawal of the request that Appeals conduct a CDP hearing, Appeals is required to issue a Notice of Determination in all cases where a taxpayer has timely requested a CDP hearing. The taxpayer may appeal such determinations made by Appeals within 30 days after the date of the Notice of Determination to the Tax Court or a district court of the United States , as appropriate.

(2) Questions and answers. The questions and answers illustrate the provisions of this paragraph (f) as follows:

Q-F1. What must a taxpayer do to obtain judicial review of a Notice of Determination?

A-F1. Subject to the jurisdictional limitations described in A-F2 of this paragraph (f)(2), the taxpayer must, within the 30-day period commencing the day after the date of the Notice of Determination, appeal Appeals's determination to the Tax Court or to a district court of the United States .

Q-F2. With respect to the relief available to the taxpayer under section 6015(b) or (c), what is the time frame within which a taxpayer may seek Tax Court review of Appeals's determination following a CDP hearing?

A-F2. If the taxpayer seeks Tax Court review not only of Appeals's denial of relief under section 6015(b) or (c), but also of relief with respect to other issues raised in the CDP hearing, the taxpayer should request Tax Court review within the 30-day period commencing the day after the date of the Notice of Determination. If the taxpayer only wants Tax Court review of Appeals's denial of relief under section 6015(b) or (c), the taxpayer should request review by the Tax Court, as provided by section 6015(e), within 90 days of Appeals's determination. If a request for Tax Court review is filed after the 30-day period for seeking judicial review under section 6330, then only the taxpayer's section 6015(b) or (c) claims may be reviewable by the Tax Court.

Q-F3. Where should a taxpayer direct a request for judicial review of a Notice of Determination?

A-F3. If the Tax Court would have jurisdiction over the type of tax specified in the CDP Notice (for example, income and estate taxes), then the taxpayer must seek judicial review by the Tax Court. If the tax liability arises from a type of tax over which the Tax Court would not have jurisdiction, then the taxpayer must seek judicial review by a district court of the United States in accordance with Title 28 of the United States Code.

Q-F4. What happens if the taxpayer timely appeals Appeals's determination to the incorrect court?

A-F4. If the court to which the taxpayer directed a timely appeal of the Notice of Determination determines that the appeal was to the incorrect court (because of jurisdictional, venue or other reasons), the taxpayer will have 30 days after the court's determination to that effect within which to file an appeal to the correct court.

Q-F5. What issue or issues may the taxpayer raise before the Tax Court or before a district court if the taxpayer disagrees with the Notice of Determination?

A-F5. In seeking Tax Court or district court review of Appeals's Notice of Determination, the taxpayer can only ask the court to consider an issue that was raised in the taxpayer's CDP hearing.

(g) Effect of request for CDP hearing and judicial review on periods of limitation--(1)In general. The periods of limitation under section 6502 (relating to collection after assessment), section 6531 (relating to criminal prosecutions), and section 6532 (relating to suits) are suspended until the date the IRS receives the taxpayer's written withdrawal of the request for a CDP hearing by Appeals or the determination resulting from the CDP hearing becomes final by expiration of the time for seeking review or reconsideration. In no event shall any of these periods of limitation expire before the 90th day after the date on which the determination with respect to such hearing becomes final upon expiration of the time for seeking review or reconsideration.

(2) Questions and answers. The questions and answers illustrate the provisions of this paragraph (g) as follows:

Q-G1. For what period of time will the periods of limitation under section 6502, section 6531, and section 6532 remain suspended if the taxpayer timely requests a CDP hearing concerning a pre-levy or post-levy CDP Notice?

A-G1. The suspension period commences on the date the IRS receives the taxpayer's written request for a CDP hearing. The suspension period continues until the IRS receives a written withdrawal by the taxpayer of the request for a CDP hearing or the determination resulting from the CDP hearing becomes final by expiration of the time for seeking its review or reconsideration. In no event shall any of these periods of limitation expire before the 90th day after the day on which there is a final determination with respect to such hearing. The periods of limitation that are suspended under section 6330 are those which apply to the taxes and the tax period or periods to which the CDP Notice relates.

Q-G2. For what period of time will the periods of limitation under section 6502, section 6531, and section 6532 be suspended if the taxpayer does not request a CDP hearing concerning the CDP Notice, or the taxpayer requests a CDP hearing, but his request is not timely?

A-G2. Under either of these circumstances, section 6330 does not provide for a suspension of the periods of limitation.

(3) Examples. The following examples illustrate the principles of this paragraph (g).

Example 1. The period of limitation under section 6502 with respect to the taxpayer's tax period listed in the CDP Notice will expire on August 1, 1999 . The IRS sent a CDP Notice to the taxpayer on April 30, 1999 . The taxpayer timely requested a CDP hearing. The IRS received this request on May 15, 1999 . Appeals sends the taxpayer its determination on June 15, 1999 . The taxpayer timely seeks judicial review of that determination. The period of limitation under section 6502 would be suspended from May 15, 1999 , until the determination resulting from that hearing becomes final by expiration of the time for seeking review or reconsideration before the appropriate court, plus 90 days.

Example 2. Same facts as in Example 1, except the taxpayer does not seek judicial review of Appeals's determination. Because the taxpayer requested the CDP hearing when fewer than 90 days remained on the period of limitation, the period of limitation will be extended to October 13, 1999 (90 days from July 15, 1999 ).

(h) Retained jurisdiction of Appeals--(1) In general. The Appeals office that makes a determination under section 6330 retains jurisdiction over that determination, including any subsequent administrative hearings that may be requested by the taxpayer regarding levies and any collection actions taken or proposed with respect to Appeals's determination. Once a taxpayer has exhausted his other remedies, Appeals's retained jurisdiction permits it to consider whether a change in the taxpayer's circumstances affects its original determination. Where a taxpayer alleges a change in circumstances that affects Appeals's original determination, Appeals may consider whether changed circumstances warrant a change in its earlier determination.

(2) Questions and answers. The questions and answers illustrate the provisions of this paragraph (h) as follows:

Q-H1. Are the periods of limitation suspended during the course of any subsequent Appeals consideration of the matters raised by a taxpayer when the taxpayer invokes the retained jurisdiction of Appeals under section 6330(d)(2)(A) or (d)(2)(B)?

A-H1. No. Under section 6330(b)(2), a taxpayer is entitled to only one section 6330 CDP hearing with respect to the tax and tax period or periods to which the unpaid tax relates. Any subsequent consideration by Appeals pursuant to its retained jurisdiction is not a continuation of the original CDP hearing and does not suspend the periods of limitation.

Q-H2. Is a decision of Appeals resulting from a subsequent hearing appealable to the Tax Court or a district court?

A-H2. No. As discussed in A-H1, a taxpayer is entitled to only one section 6330 CDP hearing with respect to the tax and tax period or periods specified in the CDP Notice. Only determinations resulting from CDP hearings are appealable to the Tax Court or a district court.

(i) Equivalent hearing--(1) In general. A taxpayer who fails to make a timely request for a CDP hearing is not entitled to a CDP hearing. Such a taxpayer may nevertheless request an administrative hearing with Appeals, which is referred to herein as an "equivalent hearing." The equivalent hearing will be held by Appeals and will generally follow Appeals procedures for a CDP hearing. Appeals will not, however, issue a Notice of Determination. Under such circumstances, Appeals will issue a Decision Letter.

(2) Questions and answers. The questions and answers illustrate the provisions of this paragraph (i) as follows:

Q-I1. What issues will Appeals consider at an equivalent hearing?

A-I1. In an equivalent hearing, Appeals will consider the same issues that it would have considered at a CDP hearing on the same matter.

Q-I2. Are the periods of limitation under sections 6502, 6531, and 6532 suspended if the taxpayer does not timely request a CDP hearing and is subsequently given an equivalent hearing?

A-I2. No. The suspension period provided for in section 6330(e) relates only to hearings requested within the 30-day period that commences the day following the date of the pre-levy or post-levy CDP Notice, that is, CDP hearings.

Q-I3. Will collection action be suspended if a taxpayer requests and receives an equivalent hearing?

A-I3. Collection action is not required to be suspended. Accordingly, the decision to take collection action during the pendency of an equivalent hearing will be determined on a case-by-case basis. Appeals may request the IRS office with responsibility for collecting the taxes to suspend all or some collection action or to take other appropriate action if it determines that such action is appropriate or necessary under the circumstances.

Q-I4. What will the Decision Letter state?

A-I4. The Decision Letter will generally contain the same information as a Notice of Determination.

Q-I5. Will a taxpayer be able to obtain court review of a decision made by Appeals with respect to an equivalent hearing?

A-I5. Section 6330 does not authorize a taxpayer to appeal the decision of Appeals with respect to an equivalent hearing. A taxpayer may under certain circumstances be able to seek Tax Court review of Appeals's denial of relief under section 6015(b) or (c). Such review must be sought within 90 days of the issuance of Appeals's determination on those issues, as provided by section 6015(e).

(j) Effective date. This section is applicable with respect to any levy which occurs on or after January 19, 1999 , and before January 22, 2002 .

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Approved January 13, 1999.
Donald C. Lubick,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on January 19, 1999 , 10:56 a.m., and published in the issue of the Federal Register for January 22, 1999 , 64 F.R. 3398)

 

Treasury Decision 8558, filed with the Federal Register on July 29, 1994 .



Estate, gift, generation-skipping transfer, and income taxes: Procedure: Levy and distraint: Notification.--Amendments to Reg. 301.6331-1 and 301.6331 -2, relating to notification requirements and restrictions with respect to the collection of taxes by means of levy and distraint, are adopted. The amendments reflect changes made to Code Secs. 6331 and 6332(c) by the Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248) and the Technical and Miscellaneous Act of 1988 (P.L. 100-647) and are effective December 10, 1992 . BACK REFERENCES: FINH 9791 and FINH 9791A.

AGENCY: Internal Revenue Service ( IRS ), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final regulations regarding the authority to collect taxes from taxpayers by means of levy and distraint under section 6331 of the Internal Revenue Code. The Technical and Miscellaneous Revenue Act of 1988 (TAMRA) amended section 6331 in several respects.

EFFECTIVE DATE: These regulations are effective December 10, 1992 .

FOR FURTHER INFORMATION CONTACT: Robert A. Walker, 202-622-3640 (not a toll-free call).

SUPPLEMENTARY INFORMATION:

Background

These final regulations contain changes to 301.6331-1 and 301.6331 -2, to reflect amendments made to sections 6331 and 6332(c) of the Internal Revenue Code (Code) by section 349(a) of TEFRA as well as by sections 6236(a), (b) and (d) of TAMRA.

The IRS published a notice of proposed rulemaking in the Federal Register on December 11, 1992 , (57 FR 58760) providing proposed rules under section 6331 of the Code. No public comments were received and accordingly, these final regulations are substantially identical to the notice of proposed rulemaking. Certain stylistic changes have been made.

TAMRA increased the 10-day requirement for notification of intention to levy to 30 days, required specific types of information to be included in the notice, and expanded the reasons for releasing a levy on salary or wages to include all the situations described in section 6343(a). TAMRA also placed restrictions on levies that are uneconomical or that are scheduled to be made on the day a person is required to appear in response to a summons issued for the purpose of collecting any underpayment of tax by that person. The final regulations reflect these changes. In addition, the final regulations change the existing regulations with respect to levying on bank deposits to conform to section 6332(c), which was enacted by TAMRA. The final regulations also reflect two amendments to section 6331 made by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA): extending to "other property" of a taxpayer the requirement of notification of intention to levy that exists for a levy on salary or wages; and requiring that any mailing of that notice be done by certified or registered mail. Finally, several stylistic changes were made to clarify parts of the regulations that were not affected by the statutory changes.

Explanation of Provisions

The final regulations make a number of minor amendments to 301.6331-1 and 301.6331 -2. As these amendments have been fully described in the notice of proposed rulemaking and have not changed (except for certain minor stylistic changes) since that time, this explanation will not repeat them here.

For the most part, the amendments were made to reflect the additional protections provided to taxpayers by the Taxpayer Bill of Rights contained in TAMRA.

Special Analyses

It has been determined that this Treasury Decision is not a significant regulatory action as defined in EO 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to these regulations, and, therefore, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Small Business Administration for comment on its impact on small business.

Drafting Information

The principal author of these regulations is Robert A. Walker, Office of Assistant Chief Counsel, (General Litigation). However, other personnel from the IRS and Treasury Department participated in their development.

 

T.D. 7874, 1983-1 CB 344


Section 6331.--Levy and Distraint
26 CFR 301.6331 -1: Levy and distraint.
TITLE 26--MINTERNAL REVENUE--CHAPTER 1, PART 301--PROCEDURE AND ADMINISTRATION



Service of Notice of Levy by Mail

AGENCY: Internal Revenue Service, Treasury.

ACTION: Final Regulations.

SUMMARY: This document provides final regulations relating to the authority of the Service to serve notice of levy by mail. These regulations will provide the public with the guidance needed to comply with the law and will affect persons upon whom notices of levy are served.

EFFECTIVE DATE: The amendments of 301.6331-1 are effective for levies made after March 10, 1983 .

FOR FURTHER INFORMATION CONTACT: Annie R. Alexander of the Legislation and Regulations Division, Office of the Chief Counsel, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C. 20224 (Attention: CC:LR:T) (202-566-3287), not a toll-free call.

SUPPLEMENTARY INFORMATION:

BACKGROUND

On Friday, February 26, 1982 , the Federal Register published proposed amendments to Regulations under Part 301, Procedure and Administration, under section 6331 of the Internal Revenue Code of 1954 (Code) (47 FR 8378).

This document contains final regulations under section 6331 of the Code relating to the authority of the Service to seize property by levy. Under section 6331 of the Code the term "levy" includes the power of distraint and seizure by any means. Regulation 301.6331-1(a)(1) provides that a levy may be made by serving a notice of levy on any person in possession of, or obligated with respect to, property or rights to property subject to levy.

In order to conserve resources, the Service has increased the number of notices of levy served by mail in accordance with law and longstanding administrative practice. Some persons upon whom notices of levy are served have expressed concern that the Service's longstanding practice has not been explicitly set forth in the regulations. Consequently, the Department of the Treasury has decided to amend the regulations to specify the procedures to be followed by the Service in serving a notice of levy by mail. The amendment will also permit persons having more than one office within an Internal Revenue district to choose one office to which notices of levy are to be mailed.

A public hearing was not requested. After consideration of all comments regarding the proposed amendments, those amendments are adopted as revised by this Treasury decision.

SUMMARY OF PUBLIC COMMENTS AND FINAL REGULATIONS

The proposed regulations authorized service of notice of levy by mail and stated that the date the notice is delivered to the person served is the date the levy is made. A number of comments were received objecting to service by regular mail and suggesting service by certified mail return receipt requested on the ground that there is no way to establish the date that regular mail is received and this creates a problem in determining priorities of levies. Even if the recipient of the notice is required to establish through normal business records the date of delivery, accurate compliance is difficult. Commentators stated that this area was ripe for factual dispute where delivery is made on a Saturday or local legalholiday and the notice is not processed until the next business day because substantial withdrawals could have occurred on Saturday and Sunday through automatic teller machines. Commentators stated that delivery by certified mail return receiptrequested would eliminate this problem, because there would be no delivery on Saturday or Sunday. The date on the receipt would establish the date of delivery, and the Internal Revenue Service would have a verifiable effective date in all cases.

While the Service recognizes the problems that may arise as a result of service of levy by regular mail, the Service has concluded that most of these problems can be avoided if there is a presumption that the time and date noted on the notice of levy by a person having authority to act on behalf of the person served is the date and time the levy is made. The Service retains the authority to use certified mail return receipt requested when necessary. However, a requirement of certified mail in all cases would be too costly to the Service and has not been adopted.

Most commentators objected to the rule in the proposed regulations which allowed delivery of a notice of levy to an branch office if a person has more than one office within the Internal Revenue district. Commentators stated a variety of reasons for their objection such as:

(1) The rule does not comport with decisional substantive law relating to private creditors,

(2) Many banks with significant branch networks do not have a central file which can be accessed with name, address and social security number of the taxpayer, so compliance with the proposed amendments is operationally impossible, and

(3) The rule would impose an undue cost and administrative burden on an innocent third party.

The final regulations deleted this sentence because the issue raised by the language is unrelated to the Service's authority to serve notices of levy by mail. Thus, this deletion should not be construed as a change of the Internal Revenue Services's position that a levy on a branch bank may be effective at other branches. The question turns on the facts and circumstances of each case See Digitrex Inc. v. Johnson 491 F. Supp. 66 (1980); Therm-X-Chemical & Oil Corp. v. Extebank, 84 A.D. 2d 787, 444 N.Y.S. 2d 26 (1981).

Some commentators expressed concern about the language in the proposed regulation which required the concurrence of the district director in order for a person to designate an office upon which the mailed notice would be served. Because the option to designate a particular office was added for the convenience of the person levied upon, the final regulation has eliminated the requirement that the district director concur with a person's designation of the office to which the notices shall be mailed.

One commentator objected to the proposed regulations' concerning no guidelines on what taxpayer identification information the notice should contain. The commentator stated that the account data system could not locate the taxpayer'sassets if only the taxpayer's name and social security number were given. If was suggested that the Internal Revenue Service be required to include the taxpayer's account number. This comment was not incorporated into the regulations because in many instances the Service does not have access to the taxpayer's account number.

EXECUTIVE ORDER 12291 AND REGULATORY FLEXIBILITY ACT

The Commissioner of Internal Revenue has determined that this final rule is not a major rule as defined in Executive Order 12291. Accordingly, a Regulatory Impact Analysis is not required.

Although this regulation was published as a notice of proposed rulemaking that solicited public comment, the Internal Revenue Service concluded when the notice was published that the regulations were interpretative and that the noticeand public procedure requirements of 5 U.S.C. 553 did not apply. Consequently, these regulations do not constitute regulations subject to the Regulatory Flexibility Act (5 U.S.C. chapter 6).

DRAFTING INFORMATION

The principal author of these regulations is Annie R. Alexander of the Legislation and Regulations Division of the Office of Chief Council, Internal Revenue Service. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in developing the regulation, both on matters of substance and style.

* * * * *

Adoption of amendments to regulations

Accordingly, 26 CFR Part 301 is amended as follows:

Paragraph. A new paragraph (c) is added to 301.633-1 to read as follows:

301.6331-1 Levy and distraint.

* * * * *

(c) Service of notice of levy by mail. A notice of levy may be served by mailing the notice to the person upon whom the service of a notice of levy is authorized under paragraph (a)(1) of this section. It such a case the date and time the notice is delivered to the person to be served is the date and time the levy is made. If the notice is sent by certified mail, return receipt requested, the date of delivery on the receipt is treated as the date the levy is made. If,after receipt of a notice of levy, an officer or other person authorized to act on behalf of the person served signs and notes the date and time of receipt of the notice of levy, the date and time so noted will be presumed to be, in the absence of proof to the contrary, the date and time of delivery. Any person may, upon written notice to the district director having audit jurisdiction over such person, have all notices of levy by mail sent to one designated office. After such a notice is received by the district director, notices of levy by mail will be sent to the designated office until a written notice withdrawing the request or a written notice designating a different office is received by the district director.

This Treasury decision is issued under the authority contained in section 7805 of the Internal Revenue Code of 1954 (68A Stat. 917; 26 U.S.C. 7805).

Roscoe L. Egger, Jr.,
Commissioner of Internal Revenue.

Approved February 28, 1983.
John E. Chapoton,
Assistant Secretary of the Treasury.

Federal Register Cite: 48 F.R. 10060
Federal Register Publication Date: March 10, 1983
Federal Register Filing Date: March 9, 1983

 

T.D. 7620 1, 1979-1 CB 401

Section 6331.--Levy and Distraint
26 CFR 301.6331 -1: Levy and distraint. (Also Section 6334; 301.6334 -1.)

TITLE 26.--INTERNAL REVENUE.--CHAPTER 1, SUBCHAPTER D, PART 301.--PROCEDURE AND ADMINISTRATION REGULATIONS



Minimum exemption from levy

AGENCY: Internal Revenue Service, Treasury.

ACTION: Final regulations.

SUMMARY: This document provides final regulations relating to amounts payable to a delinquent taxpayer which are exempt from a levy for the collection of unpaid tax. Changes to the applicable law were made by the Tax Reform Act of 1976 [Pub. L. 94-455, 1976-3 C.B. (Vol. 1) 1]. The regulations provide necessary guidance to the public for compliance with the law and principally affect employees whose wages or salary are the subject of levy, as well as their employers who must comply with the terms of the levy.

DATE: The regulations are effective for levies made after February 28, 1977.

FOR FURTHER INFORMATION CONTACT: Kyllikki Kusma of the Legislation and Regulations Division, Office of the Chief Counsel, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C. 20224, Attention: CC:LR:T, 202-566-3287 , not a toll-free call.

SUPPLEMENTARY INFORMATION:

BACKGROUND

On August 24, 1978, the Federal Register published proposed amendments to the Income Tax Regulations (26 CFR Part 301) under sections 6331, 6332, and 6334 of the Internal Revenue Code of 1954 (Code) (43 FR 37717). The amendments were proposed to conform the regulations to section 1209 of the Tax Reform Act of 1976 (90 Stat. 1709), [Pub. L. 94-455, 1976-3 C.B. (Vol. 1) 1, 185]. After consideration of all comments regarding the proposed amendments, those amendments are adopted by this Treasury decision. No requests for a public hearing were received and accordingly none was held.

EXPLANATION OF REGULATIONS

The Tax Reform Act of 1976 amended section 6331 of the Internal Revenue Code of 1954 to provide that a levy on wages or salary is continuous from the date of the levy until the liability out of which the levy arose is satisfied or becomes unenforceable by lapse of time. These regulations reflect this amendment of section 6331 of the Code.

The legislation also amended section 6334 of the Code to provide that certain amounts payable to a taxpayer as wages, salary, or other income are exempt from levy. The regulations provide rules for determining the taxpayer's payroll period and prescribed amounts exempt from levy for each such period. Additionally, rules are provided by which the taxpayer is to determine the number of persons who are his dependents and by which he is to claim amounts which are exempt for such dependents.

ADDITIONAL CONSIDERATIONS

These regulations are needed in order to provide guidance to the public as well as to government employees responsible for the implementation of sections 6331, 6332, and 6334 of the Code. Considering both the direct and indirect effects of these regulations, it is believed that they satisfactorily implement section 1209 of the Tax Reform Act of 1976. Evaluation of the effectiveness of the regulations after issuance will be based upon comments received from offices within the Internal Revenue Service and the Treasury Department, other governmental agencies, and the public.

PUBLIC COMMENTS

Several comments were received in response to the proposed regulations. One expressed concern that the proposed regulations are not entirely clear as to whether the amount exempt from levy is an employee's gross salary or net salary. It was decided that the regulations do not need to be amended to reflect this comment because it is the Service's policy not to levy on gross wages. Another comment concerned the application of 301.6334-2(c)(1). The writer questioned how an employer is to learn that an employee's second source of income is equal to or exceeds the amount of the exemption. Section 301.6334 -2(c)(1) is amended to respond to this comment.

DRAFTING INFORMATION

The principal author of this regulation is Kyllikki Kusma of the Legislation and Regulations Division of the Office of Chief Counsel, Internal Revenue Service. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in developing the regulation, both on matters of substance and style.

Adoption of amendments to the regulations

Accordingly, the following amendments to the regulations (26 CFR Part 301) are adopted:

Paragraph 1. Section 301.6331 is deleted.

Par. 2. Paragraph (a)(1) of 301.6331-1 is revised to read as follows:

301.6331-1 Levy and distraint.

(a) Authority to levy--(1) In general. If any person liable to pay any tax neglects or refuses to pay the tax within 10 days after notice and demand, the district director to whom the assessment is charged (or, upon his request, any other district director) may proceed to collect the tax by levy. The district director may levy upon any property, or rights to property, whether real or personal, tangible or intangible, belonging to the taxpayer. The district director may also levy upon property with respect to which there is a lien provided by section 6321 or 6324 for the payment of the tax. For exemption of certain property from levy, see section 6334 and the regulations thereunder. As used in section 6331 and this section, the term "tax" includes any interest, additional amount, addition to tax, or assessable penalty, together with costs and expenses. Property subject to a Federal tax lien which has been sold or otherwise transferred by the taxpayer may be seized while in the hands of the transferee or any subsequent transferee. However, see provisions under sections 6323 and 6324(a)(2) and (b) for protection of certain transferees against a Federal tax lien. Levy may be made by serving a notice of levy on any person in possession of, or obligated with respect to, property or rights to property subject to levy, including receivables, bank accounts, evidences of debt, securities, and salaries, wages, commissions, or other compensation. Except as provided in 301.6331-2(c) with regard to a levy on salary or wages, a levy extends only to property possessed and obligations which exist at the time of the levy. Obligations exist when the liability of the obligor is fixed and determinable although the right to receive payment thereof may be deferred until a later date. For example, if on the first day of the month a delinquent taxpayer sold personal property subject to an agreement that the buyer remit the purchase price on the last day of the month, a levy made on the buyer on the tenth day of the month would reach the amount due on the sale, although the buyer need not satisfy the levy by paying over the amount to the district director until the last day of the month. Similarly, a levy only reaches property in the possession of the person levied upon at the time the levy is made. For example, a levy made on a bank with respect to the account of a delinquent taxpayer is satisfied if the bank surrenders the amount of the taxpayer's balance at the time the levy is made. The levy has no effect upon any subsequent deposit made in the bank by the taxpayer. Subsequent deposits may be reached only by a subsequent levy on the bank.

Par. 3. Paragraph (a)(4)(i), (ii) and (iii) of 301.6331-1 is amended by striking out "accrued" each place it appears therein.

Par. 4. Paragraph (c) of 301.6331-1 is deleted.

Par. 5. A new 301.6331-2 is added immediately after 301.6331-1:

301.6331-2 Levy and distraint on salary and wages.

(a) Notice of intent to levy. Levy may be made upon the salary or wages of a taxpayer for any unpaid tax only after the district director or the director of the service center has notified the taxpayer in writing of the intent to levy. The notice must be given in person, left at the dwelling or usual place of business of the taxpayer, or be sent by mail to the taxpayer's last known address, no less than 10 days before the day of levy. The notice of intent to levy is in addition to, and may be given at the same time as, the notice and demand described in 301.6303-1.

(b) Jeopardy. Paragraph (a) of this section does not apply to a levy if the district director or director of the service center has made a finding under 301.6331-1(a)(2) that the collection of tax is in jeopardy.

(c) Continuing effect of levy. A levy on salary or wages is continuous from the time of the levy until the liability out of which the levy arose is satisfied or becomes unenforceable by reason of lapse of time. For this purpose, the term "salary or wages" includes compensation for services paid in the form of fees, commissions, bonuses and similar items. The levy attaches to both salary or wages earned but not yet paid at the time of the levy, and salary or wages earned and becoming payable (or paid in the form of an advance) subsequent to the date of the levy, until the levy is released pursuant to paragraph (d) of this section. In general, salaries or wages that are the subject of a continuing levy, if not exempt from levy under section 6334(a)(8) or (9), become payable to the district director as the payor would otherwise be obligated to pay over the money to the taxpayer. For example, if a wage earner is paid on the Wednesday following the close of each workweek, a levy made upon his employer on any Monday would reach both his wages due for the prior workweek and his wages for succeeding workweeks as such wages become payable. In such a case the levy would be satisfied if the employer, on the first Wednesday after the levy on each Wednesday thereafter, pays over to the district director wages which would otherwise be paid to the employee on such Wednesday, until the employer receives a notice of release from levy described in paragraph (d) of this section. See, however, 301.6334-5(d) for rules which permit a delayed payment to the district director in certain cases where amounts payable to the taxpayer are exempt from levy under section 6334(a)(9) and (d).

(d) Release and notice of release from levy. The district director will promptly release a continuing levy on salary or wages when the liability out of which the levy arose is satisfied or becomes unenforceable by reason of lapse of time. The district director will also promptly notify the person upon whom the levy was made that it has been released.

(e) Effective dates. Paragraphs (a) and (b) of this section apply to levies made after March 31, 1972. Paragraphs (c) and (d) of this section apply to levies made after February 28, 1977.

Par. 6. Section 301.6332 is deleted.

Par. 7. Paragraph (b)(1) of 301.6332-1 is amended to read as follows:

301.6332-1 Surrender of property subject to levy.

* * * * *

(b) Enforcement of levy--(1) Extent of personal liability. Any person who, upon demand of the district director, fails or refuses to surrender any property or right to property subject to levy is liable in his own person and estate in a sum equal to the value of the property or rights not so surrendered, together with costs and interest. The liability, however, may not exceed the amount of the taxes for the collection of which the levy was made. Interest is to be computed at the annual rate referred to in regulations under section 6621 from the date of the levy, or, in the case of a continuing levy on salary or wages (see section 6331(d)(3)), from the date the person would otherwise have been obligated to pay over the wages or salary to the taxpayer. Any amount recovered, other than costs, will be credited against the tax liability for the collection of which the levy was made.

Par. 8. Section 301.6333 is deleted.

Par. 9. Section 301.6334 is deleted.

Par. 10. Paragraph (a) of 301.6334-1 is amended by revising the introductory sentence and the subparagraph heading of subparagraph (8) and by adding a new subparagraph (9). These amended and added provisions read as follows:

301.6334-1 Property exempt from levy.

(a) Enumeration. In addition to exemptions allowed as a matter of Internal Revenue Service policy, there shall be exempt from levy--

* * * * *

(8) Judgments for support of minor children. * * *

(9) Minimum exemption for wages, salary, and other income. Amounts payable to or received by the taxpayer as wages or salary for personal services, or as other income, to the extent provided in 301.6334-2 through 301.6334-6.

Par. 11. The following new sections are added immediately after 301.6334-1:

301.6334-2 Wages, salary and other income.

(a) In general. Under section 6334(a)(9) and (d) certain amounts payable to or received by a taxpayer as wages, salary or other income are exempt from levy. This section describes the income of a taxpayer that is eligible for the exemption from levy (paragraph (b)) and how exempt amounts are to be paid to the taxpayer (paragraph (c)). Section 301.6334 -3 describes that sum which will be exempt from levy for each of the taxpayer's payroll periods. Payroll periods are described in 301.6334-4. Amounts exempt from levy are determined in part by the number of persons claimed by the taxpayer as dependents. Section 301.6334 -5 defines the term "dependent" for purposes of determining amounts exempt from levy, and describes the manner in which the taxpayer is to claim any dependent exemptions.

(b) Eligible taxpayer income. Only wages, salary or other income payable to the taxpayer after the levy is made on the payor may be exempt from levy under section 6334(a)(9). No amount of wages, salary or other income which is paid to the taxpayer before levy is made on the payor will be so exempt from levy. The provisions of this subparagraph may be illustrated by the following example:

Example. Delinquent taxpayer A, an individual, is employed by the M Corporation and is paid wages on the first and fifteenth day of each month. Accordingly, A is paid wages on Monday, August 15, 1977 . On Wednesday, August 17, A deposits these wages in his personal checking account at Bank X. On Friday, August 19, levy is made on the M Corporation and also on Bank X. Amounts payable to A as wages on September 1, 1977 and any payday thereafter may be exempt from levy under section 6334(a)(9). No amount of the wages A deposited in his account at Bank X on August 17, 1977 , are exempt from levy under section 6334(a)(9).

(c) Payment of exempt amounts to taxpayer--(1) From wages, salary or other income not subject to levy. In the case of a taxpayer who has more than one source of wages, salary or other income, the district director may elect to levy on only one or more such sources while leaving other sources of income free from levy. If these wages, salary or other income which the district director leaves free from levy equal or exceed the amount to which the taxpayer is entitled as an exemption from levy under 6334(a)(9) and (d) and 301.6334-3 (and are not otherwise exempt), then no amount of the taxpayer's wages, salary or other income on which the district director elects to levy is exempt from levy. The district director shall notify the employer or other person subject to the levy that no amount of the taxpayer's wages, salary, or other income is exempt from levy.

The provisions of this subparagraph may be illustrated by the following example:

Example. Delinquent taxpayer C is a full-time employee of the X corporation and is paid wages totaling $450 on the first and fifteenth day of each month (semi-monthly). C also performs services for the Y corporation and is paid a salary of $290 each month. C has one dependent as defined in 301.6334-5. Levy is served on the X corporation with respect to wages payable to C. Levy is not served on the Y corporation. Under 301.6334-3(d), C is entitled to an exemption from levy totaling $140.83 for each semi-monthly pay period (or $281.66 per month). However, because levy has not been made on C's salary paid by the Y corporation ($290 per month) and that salary exceeds the amount to which C is entitled monthly as an exemption ($281.66), no amount of C's wages paid by the X corporation is exempt from levy.

(2) From wages, salary or other income subject to levy. If the taxpayer's income upon which the district director does not levy is less than that amount to which the taxpayer is entitled as an exemption, then an amount determined pursuant to 301.6334-3 is to be paid to the taxpayer from those wages, salary or other income which are subject to levy. The district director will designate those wages, salary or other income subject to levy from which such amount will be paid to the taxpayer. The district director will generally make this designation by delivering to the employer or other person levied upon the form upon which the taxpayer is to claim any dependent exemption. The form will accompany the notice of levy. The person receiving the form from the district director must promptly deliver it to the taxpayer. In the case of some employers having a large number of employees, however, the district director will send the form upon which an employee is to claim any dependent exemption directly to the employee. In such a case, the notice of levy will indicate that the form for claiming dependent exemptions has been sent to the taxpayer. If a notice of levy is not accompanied by the form for claiming dependent exemptions and does not indicate that the form was sent directly to the taxpayer, then the person levied upon must make payment to the district director without regard to amounts prescribed by 301.6334-3 as exempt from levy. If a notice of levy is accompanied by the form for claiming dependent exemptions or indicates that the form was sent directly to the taxpayer, then the person levied upon is to pay over to the taxpayer amounts determined to be exempt from levy pursuant to 301.6334-3 and 301.6334-5(b) and (c) (relating to the requirement that the taxpayer submit a claim for any dependent exemption). Amounts not exempt from levy are to be paid to the district director in accordance with the terms of the levy.

301.6334-3 Determination of exempt amount.

Amounts payable to the taxpayer as wages, salary, or other income for each payroll period described in 301.6334-4 are exempt from levy as follows:

(a) If the payroll period is daily: $10, plus $3 for each person who is claimed as a dependent pursuant to 301.6334-5.

(b) If the payroll period is weekly: $50, plus $15 for each person who is claimed as a dependent pursuant to 301.6334-5.

(c) If the payroll period is biweekly: $100, plus $30 for each person who is claimed as a dependent pursuant to 301.6334-5.

(d) If the payroll period is semimonthly: $108.33, plus $32.50 for each person who is claimed as a dependent pursuant to 301.6334-5.

(e) If the payroll period is monthly: $216.67, plus $65 for each person who is claimed as a dependent pursuant to 301.6334-5.

(f) If the payroll period is not daily, weekly, biweekly, semimonthly or monthly: a proportionate amount based upon the sum of an annual exemption of $2,600 plus $780 for each person who is claimed as a dependent pursuant to 301.5334-5.

301.6334-4 Determination of payroll period.

For purposes of determining the amount of wages, salary or other income exempt from levy under section 6334(a)(9)--

(a) Regularly used calendar periods. in the case of wages, salary or other income paid to the taxpayer on the basis of an established calendar period regularly used by the employer or other person levied upon for payroll or payment purposes (e.g., daily, weekly, biweekly, semimonthly, or monthly), that period is the taxpayer's payroll period.

(b) Amounts paid on recurrent but irregular basis. In the case of wages, salary or other income paid to the taxpayer on a recurrent but irregular basis, the first day of the taxpayer's payroll period is that day following the day upon which the wages, salary, or other income were last paid to the taxpayer. The last day of the payroll period is that day upon which the current payment becomes payable to him. However, in any case in which (1) amounts are paid to the taxpayer on a recurrent but irregular basis, and (2) the last payment was paid to the taxpayer more than 60 days before the current payment becomes payable, the current payment will be deemed a one-time payment (see paragraph (c)).

(c) Nonrecurrent payments. In the case of wages, salary or other income paid to the taxpayer on a one-time basis, the taxpayer's payroll period is deemed to be weekly (i.e., the one-week period ending on the day of payment).

301.6334-5 Dependent exemption.

(a) Dependent defined. For purposes of 301.6334 -2 through 301.6334 -4, a person is a dependent of the taxpayer for any payroll period of the taxpayer, if--

(1) Over half of that person's support for the payroll period was received from the taxpayer, and

(2) The person is the taxpayer's spouse, or bears a relationship to the taxpayer specified in section 152(a)(1) through (9) (relating to definition of dependent) on the last day of the payroll period, and

(3) The person is not the taxpayer's minor child with respect to whom amounts are exempt from levy under section 6334(a)(8) (relating to exemption from levy for judgments for support of minor children) at any time during the payroll period.

For purposes of subparagraph (2) of this paragraph "payroll period" should be substituted for "taxable year" each place it appears in section 152(a)(9).

(b) Claim for dependent exemption. No amount prescribed as being exempt from levy for each person who is claimed as a dependent will be so exempt unless a claim for dependent exemption is submitted to the employer or other person levied upon. A claim for dependent exemption shall be made by either--

(1) Completion of the form provided for this purpose by the Internal Revenue Service, or

(2) A written statement that (i) identifies by name and by relationship to the taxpayer each person for whom a dependent exemption is claimed, (ii) is signed by the taxpayer, and (iii) contains a declaration that it is made under the penalties of perjury.

(c) Submission of claim for dependent exemption. The taxpayer must submit the claim for dependent exemption to the employer or other person levied upon no later than the later of--

(1) The third day before the last day of the payroll period for which the exemption is claimed (that is, the third day before payday), or

(2) If the district director delivers the form for claiming a dependent exemption to the employer or other person levied upon (see 301.6334-2(c)(2)), the second day after the date the taxpayer receives the form.

For purposes of subparagraphs (1) and (2) of this paragraph, the term "day" does not include Saturday, Sunday or a legal holiday within the meaning of section 7503. Failure on the part of the taxpayer to submit a timely claim for dependent exemption will result in the loss of the dependent exemption for the applicable pay period, except that the employer or other person levied upon may accept a claim for dependent exemption not timely submitted in accordance with this paragraph, and may prepare a disbursement to the taxpayer based upon a dependent exemption claimed therein, if payment to the district director in accordance with the levy is not thereby delayed.

(d) Payment of amounts not exempt from levy to district director--(1) Delayed payment in certain case. In general, wages, salary or other income the subject of a levy are payable to the district director on the date the payor is otherwise obligated to pay the taxpayer (see 301.6331-2(c)). If, however, as described in paragraph (c)(2) of this section, the taxpayer may submit a claim for dependent exemption after the third day before payday, amounts payable to the taxpayer on that payday, to the extent not exempt from levy, are payable to the district director on the third day following the date on which the taxpayer may timely submit the claim for dependent exemption under such paragraph (c)(2). For purposes of this rule, the term "day" does not include Saturday, Sunday or a legal holiday within the meaning of section 7503.

(2) Example. The provisions of this paragraph may be illustrated by the following example:

The taxpayer is paid wages on the Wednesday following the close of each work week. Levy is made on his employer on Monday. The form for claiming a dependent exemption, which accompanied the notice of levy (see 301.6334-2(c)), is delivered to the taxpayer by the employer on the following day, Tuesday. Under paragraph (c)(2) of this section, the taxpayer may timely submit a claim for dependent exemption as late as Thursday, the day after the first payday to which the levy applies. Under this paragraph, wages payable to the taxpayer on that first Wednesday payday, to the extent not exempt from levy, are payable to the district director on the following Tuesday. Thereafter, wages payable to the employee on each Wednesday, to the extent not exempt from levy, are payable to the district director on such Wednesday (see 301.6331-2(c)).

301.6334-6 Effective dates.

Sections 301.6334 -2 through 301.6334 -5 apply with respect to levies on wages, salary, and other income made after February 28, 1977.

301.6334-7 Supersession of temporary regulations.

Sections 301.6334 -2 through 301.6334 -5 supersede 404.6334(d)-1 of the Temporary Regulations on Procedure and Administration Under the Tax Reform Act of 1976.

This Treasury decision is issued under the authority in section 6334(d) and section 7805 of the Internal Revenue Code of 1954 (68A Stat. 917; 26 U.S.C. 7805).

JEROME KURTZ,
Commissioner of Internal Revenue.

Approved May 4, 1979.
DONALD C. LUBICK,
Assistant Secretary of the Treasury.

Federal Register Cite: 44 F.R. 27986
Federal Register Publication Date: May 14, 1979
Federal Register Filing Date: May 11, 1979

---------- [Footnotes] ----------

 

1 This publication of the Treasury Decision contains the full text of the regulations. The individual instructions for modifying the notice of proposed rulemaking have been omitted.

Treasury Decision 7139 1, 1971-2 CB 408

Federal Register Filing Date: August 11, 1971

Section 6321.--Lien for Taxes

26 CFR 301.6321 -1: Lien for taxes. (Also Section 6331, 301.6331 -1.)
TITLE 26--INTERNAL REVENUE.--CHAPTER I, SUBCHAPTER F, PART 301.--PROCEDURE AND ADMINISTRATION



Liens and levies upon interests in certain lands held in trust by the United States for noncompetent Indians

DEPARTMENT OF THE TREASURY,
OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington, D.C. 20024.

To Officers and Employees of the Internal Revenue Service and Others Concerned:

In order to provide revised rules regarding liens and levies upon interests in certain lands held in trust by the United States for noncompetent Indians, the Regulations on Procedure and Administration (26 CFR Part 301) under sections 6321 and 6331 of the Internal Revenue Code of 1954 are amended as follows:

PARAGRAPH 1. Section 301.6321 -1 is revised to read as follows:

301.6321-1 Lien for taxes.

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, tangible or intangible, belonging to such person. The lien attaches to all property and rights to property belonging to such person at any time during the period of the lien, including any property or rights to property acquired by such person after the lien arises. Solely for purposes of sections 6321 and 6331, any interest in restricted land held in trust by the United States for an individual noncompetent Indian (and not for a tribe) shall not be deemed to be property, or a right to property, belonging to such Indian. For the special lien for estate and gift taxes, see section 6324 and 301.6324-1.

PAR . 2. Paragraph (a) of 301.6331-1 is amended by adding immediately after subparagraph (4), a new subparagraph (5) which reads as follows:

301.6331-1 Levy and distraint.

(a) Authority to levy * * *

(5) Noncompetent Indians. Solely for purposes of sections 6321 and 6331, any interest in restricted land held in trust by the United States for an individual noncompetent Indian (and not for a tribe) shall not be deemed to be property, or a right to property, belonging to such Indian.

* * * * *

Because this Treasury decision is of a clarifying nature, it is found that it is unnecessary to issue to with notice and public procedure thereon under subsection (b) of section 553 of title 5 of the United States Code or subject to the effective date limitation of subsection (d) of that section.

(This Treasury decision is issued under the authority contained in section 7805 of the Internal Revenue Code of 1954 (68A Stat. 917; 26 U.S.C. 7805).)

RANDOLPH W. THROWER,
Commissioner of Internal Revenue.

Approved August 6, 1971.
JOHN S. NOLAN,
Acting Assistant Secretary of the Treasury.

Federal Register Cite: 36 F.R. 15040
Federal Register Publication Date: August 12, 1971

---------- [Footnotes] ----------

 

1 36 F.R. 15040.

Treasury Decision 7180 1, 1972-1 CB 386

Federal Register Filing Date: April 12, 1972

Section 6331.--Levy and Distraint
26 CFR 301.6331 : Statutory provisions; levy and distraint. (Also Section 6332; 301.6332 .)

TITLE 26.--INTERNAL REVENUE.--CHAPTER 1, SUBCHAPTER F, PART 301.--PROCEDURE AND ADMINISTRATION


Seizure of property for collection of taxes

DEPARTMENT OF THE TREASURY,
OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington, D.C. 20224.

To Officers and Employees of the Internal Revenue Service and Others Concerned:

On August 28, 1971 , notice of proposed rule making to conform the Regulations on Procedure and Administration (26 CFR Part 301) under sections 6331, 6332, 6334, 6335, 6337, 6338, 6339, 6342, and 6343 of the Internal Revenue Code of 1954 to section 104 of the Federal Tax Lien Act of 1966 (80 Stat. 1135) was published in the Federal Register (36 F.R. 17349). Sections 301.6332 and 301.6332 -2 of the regulations hereby adopted supersede the provisions of 400.3 and 400.3-1 (temporary regulations concerning surrender of property subject to levy in the case of life insurance and endowment contracts) of this chapter, respectively, which were prescribed by T.D. 6944 [C.B. 1968-1, 854], approved January 17, 19 68 (33 F.R. 733). After consideration of all such relevant matter as was presented by interested persons regarding the rules proposed, the following amendments are hereby adopted.

PARAGRAPH 1. Section 301.6331 is amended by revising section 6331(b) and by adding a historical note. These revised and added provisions read as follows:

301.6331 Statutory provisions; levy and distraint.

Sec. 6331. Levy and distraint. * * *

(b) Seizure and sale of property. The term "levy" as used in this title includes the power of distraint and seizure by any means. A levy shall extend only to property possessed and obligations existing at the time thereof. In any case in which the Secretary or his delegate may levy upon property or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible or intangible).

* * * * *

[Sec. 6331 as amended by sec. 104(a), Federal Tax Lien Act of 1966 (80 Stat. 1135) [P.L. 89-719, C.B. 1966-2, 623]]

PAR . 2. Paragraph (a)(1) of 301.6331-1 is amended to read as follows:

301.6331-1 Levy and distraint.

(a) Authority to levy--(1) In general. If any person liable to pay any tax neglects or refuses to pay such tax within 10 days after notice and demand, the district director to whom the assessment is charged or, upon his request, any other district director may proceed to collect the tax by levy upon any property, or rights to property, whether real or personal, tangible or intangible, either belonging to such person or with respect to which there is a lien provided by section 6321 or 6324 (or the corresponding provision of prior law) for the payment of such tax. As used in section 6331 and this section, the term "tax" includes any interest, additional amount, addition to tax, or assessable penalty, together with any costs and expenses that may accrue in addition thereto. For exemption of certain property from levy, see section 6334 and the regulations thereunder. Property subject to a Federal tax lien, which has been sold or otherwise transferred by the taxpayer, may be seized while in the hands of the transferee or of any subsequent transferee. However, see provisions under sections 6323 and 6324(a)(2) and (b) for protection of certain transferees against a Federal tax lien.

Levy may be made by serving a notice of levy on any person in possession of, or obligated with respect to, property or rights to property subject to levy including receivables, bank accounts, evidences of debt, securities, and accrued salaries, wages, commissions, and other compensation. A levy extends only to property possessed and obligations which exist at the time of the levy. Obligations exist when the liability of the obligor is fixed and determinable although the right to receive payment thereof may be deferred until a later date. For example, if a wage earner is paid on the Wednesday following the close of each workweek, a levy made upon his employer on Monday would reach his wages due for the prior workweek, although the employer need not satisfy the levy by paying over such amount to the district director until Wednesday. Similarly, a levy only reaches property subject to levy in the possession of the person levied upon at the time the levy is made. If, for example, a levy is made on a bank with respect to the account of a delinquent taxpayer and the bank surrenders to the district director the amount of the taxpayer's balance at the time the levy is made, the levy is satisfied. The levy has no effect upon any subsequent deposit made in the bank by the taxpayer. Subsequent deposits may be reached only by a subsequent levy on the bank.

* * * * *

PAR . 3. Section 301.6332 is amended by revising subsections (a) and (b) of section 6332, by redesignating subsection (c) of section 6332 as subsection (e), by adding new subsections (c) and (d) to section 6332, and by adding a historical note. These amended and added provisions read as follows:

301.6332 Statutory provisions; surrender of property subject to levy.

Sec. 6332. Surrender of property subject to levy--(a) Requirement. Except as otherwise provided in subsection (b), any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made shall, upon demand of the Secretary or his delegate, surrender such property or rights (or discharge such obligation) to the Secretary or his delegate, except such part of the property or rights as is, at the time of such demand, subject to an attachment or execution under any judicial process.

(b) Special rule for life insurance and endowment contracts--(1) In general. A levy on an organization with respect to a life insurance or endowment contract issued by such organization shall, without necessity for the surrender of the contract document, constitute a demand by the Secretary or his delegate for payment of the amount described in paragraph (2) and the exercise of the right of the person against whom the tax is assessed to the advance of such amount. Such organization shall pay over such amount 90 days after service of notice of levy. Such notice shall include a certification by the Secretary or his delegate that a copy of such notice has been mailed to the person against whom the tax is assessed at his last known address.

(2) Satisfaction of levy. Such levy shall be deemed to be satisfied if such organization pays over to the Secretary or his delegate the amount which the person against whom the tax is assessed could have had advanced to him by such organization on the date prescribed in paragraph (1) for the satisfaction of such levy, increased by the amount of any advance (including contractual interest thereon) made to such person on or after the date such organization had actual notice or knowledge (within the meaning of section 6323(i)(1)) of the existence of the lien with respect to which such levy is made, other than an advance (including contractual interest thereon) made automatically to maintain such contract in force under an agreement entered into before such organization had such notice or knowledge.

(3) Enforcement proceedings. The satisfaction of a levy under paragraph (2) shall be without perjudice to any civil action for the enforcement of any lien imposed by this title with respect to such contract.

(c) Enforcement of levy--(1) Extent of personal liability. Any person who fails or refuses to surrender any property or rights to property, subject to levy, upon demand by the Secretary or his delegate, shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of taxes for the collection of which such levy has been made, together with costs and interest on such sum at the rate of 6 percent per annum from the date of such levy. Any amount (other than costs) recovered under this paragraph shall be credited against the tax liability for the collection of which such levy was made.

(2) Penalty for violation. In addition to the personal liability imposed by paragraph (1), if any person required to surrender property or rights to property fails or refuses to surrender such property or rights to property without reasonable cause, such person shall be liable for a penalty equal to 50 percent of the amount recoverable under paragraph (1). No part of such penalty shall be credited against the tax liability for the collection of which such levy was made.

(d) Effect of honoring levy. Any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made who, upon demand by the Secretary or his delegate, surrenders such property or rights to property (or discharges such obligation) to the Secretary or his delegate (or who pays a libility under subsection (c)(1)) shall be discharged from any obligation or liability to the delinquent taxpayer with respect to such property or rights to property arising from such surrender or payment. In the case of a levy which is satisfied pursuant to subsection (b), such organization shall also be discharged from any obligation or liability to any beneficiary arising from such surrender or payment.

(e) Person defined. The term "person," as used in subsection (a), includes an officer or employee of a corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to surrender the property or rights to property, or to discharge the obligation.

[Sec. 6332 as amended by sec. 104(b), Federal Tax Lien Act of 1966 (80 Stat. 1135) [P.L. 89-719, C.B. 1966-2, 623]]

PAR . 4. Section 301.6332 -1 is amended by revising paragraphs (a)(1), (b), and (c) and by adding a new paragraph (d). These revised and added provisions read as follows:

301.6332-1 Surrender of property subject to levy.

(a) Requirement--(1) In general. Except as otherwise provided in 301.6332-2, relating to levy in the case of life insurance and endowment contracts, any person in possession of (or obligated with respect to) property or rights to property subject to levy and upon which a levy has been made shall, upon demand of the district director, surrender the property or rights (or discharge the obligation) to the district director, except that part of the property or rights (or obligation) which, at the time of the demand, is actually or constructively under the jurisdiction of a court because of an attachment or execution under any judicial process.

* * * * *

(b) Enforcement of levy--(1) Extent of personal liability. Any person who, upon demand of the district director, fails or refuses to surrender any property or right to property subject to levy is liable under the provisions of section 6332(c)(1) in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of the taxes for the collection of which the levy has been made, together with costs and interest on such sum at the rate of 6 percent per annum from the date of the levy. Any amount, other than costs, recovered under section 6332(c)(1) shall be credited against the tax liability for the collection of which the levy was made.

(2) Penalty for violation. In addition to the personal liability described in subparagraph (1) of this paragraph, any person who is required to surrender property or rights to property and who fails or refuses to surrender them without reasonable cause is liable for a penalty equal to 50 percent of the amount recoverable under section 6332(c)(1). No part of the penalty described in this subparagraph shall be credited against the tax liability for the collection of which the levy was made. The penalty described in this subparagraph is not applicable in cases where bona fide dispute exists concerning the amount of the property to be surrendered pursuant to a levy or concerning the legal effectiveness of the levy. However, if a court in a later enforcement suit sustains the levy, then reasonable cause would usually not exist to refuse to honor a later levy made under similar circumstances.

(c) Effect of honoring levy. Any person in possession of, or obligated with respect to, property or rights to property subject to levy and upon which a levy has been made who, upon demand by the district director, surrenders the property or rights to property, or discharges the obligation, to the district director, or who pays a liability described in paragraph (b)(1) of this section, is discharged from any obligation or liability to the delinquent taxpayer with respect to the property or rights to property arising from the surrender or payment. If an insuring organization satisfies a levy with respect to a life insurance or endowment contract in accordance with 301.6332-2, the insuring organization is discharged from any obligation or liability to any beneficiaries of the contract arising from the surrender or payment. Also, it is discharged from any obligation or liability to the insured or other owner. Any person who mistakenly surrenders to the United States property or rights to property not properly subject to levy is not relieved from liability to a third party who owns the property. The owners of mistakenly surrendered property may, however, secure from the United States the administrative relief provided for in section 6343(b) or may bring suit to recover the property under section 7426.

(d) Person defined. The term "person," as used in section 6332(a) and this section, includes an officer or employee of a corporation or a member or employee of a partnership, who is under a duty to surrender the property or rights to property or to discharge the obligation. In the case of a levy upon the salary or wages of an officer, employee, or elected or appointed official of the United States, the District of Columbia, or any agency or instrumentality of either, the term "person" includes the officer or employee of the United States, of the District of Columbia, or of such agency or instrumentality who is under a duty to discharge the obligation. A to the officer or employee who is under such duty, see paragraph (a)(4)(i) of 301.6331-1.

PAR . 5. The following new section is inserted immediately following 301.6332-1.

301.6332-2 Surrender of property subject to levy in the case of life insurance and endowment contracts.

(a) In general. This section provides special rules relating to the surrender of property subject to levy in the case of life insurance and endowment contracts. The provisions of 301.6332-1 which relate generally to the surrender of property subject to levy apply, to the extent not inconsistent with the special rules set forth in this section, to a levy in the case of life insurance and endowment contracts.

(b) Effect of service of notice of levy--(1) In general. A notice of levy served by a district director on an insuring organization with respect to a life insurance or endowment contract issued by the organization shall constitute--

(i) A demand by the district director for the payment of the cash loan value of the contract adjusted in accordance with paragraph (c) of this section, and

(ii) The exercise of the right of the person against whom the tax is assessed to the advance of such cash loan value.

It is unnecessary for the district director to surrender the contract document to the insuring organization upon which the levy is made. However, the notice of levy will include a certification by the district director that a copy of the notice of levy has been mailed to the person against whom the tax is assessed at his last known address. At the time of service of the notice of levy, the levy is effective with respect to the cash loan value of the insurance contract, subject to the condition that if the levy is not satisfied or released before the 90th day after the date of service, the levy can be satisfied only by payment of the amount described in paragraph (c) of this section. Other than satisfaction or release of the levy, no event during the 90-day period subsequent to the date of service of the notice of levy shall release the cash loan value from the effect of the levy. For example, the termination of the policy by the taxpayer or by the death of the insured during such 90-day period shall not release the levy. For the rules relating to the time when the insuring organization is to pay over the required amount, see paragraph (c) of this section.

(2) Notification of amount subject to levy--(i) Full payment before the 90th day. In the event that the unpaid liability to which the levy relates is satisfied at any time during the 90-day period subsequent to the date of service of the notice of levy, the district director will promptly give the insuring organization written notification that the levy is released.

(ii) Notification after the 90th day. In the event that notification is not given under subdivision (i) of this subparagraph, the district director will, promptly following the 90th day after service of the notice of levy, give the insuring organization written notification of the current status of all accounts listed on the notice of levy, and of the total payments received since service of the notice of levy. This notification will be given to the insuring organization whether or not there has been any change in the status of the accounts.

(c) Satisfaction of levy--(1) In general. The levy described in paragraph (b) of this section with respect to a life insurance or endowment contract shall be deemed to be satisfied if the insuring organization pays over to the district director the amount which the person against whom the tax is assessed could have had advanced to him by the organization on the 90th day after service of the notice of levy on the organization. However, this amount is increased by the amount of any advance (including contractual interest thereon), generally called a policy loan, made to the person on or after the date the organization has actual notice or knowledge, within the meaning of section 6323(i)(1), of the existence of the tax lien with respect to which the levy is made. The insuring organization may, nevertheless, make an advance (including contractual interest thereon), generally called an automatic premium loan, made automatically to maintain the contract in force under an agreement entered into before the organization has such actual notice or knowledge. In any event, the amount paid to the district director by the insuring organization is not to exceed the amount of the unpaid liability shown on the notification described in paragraph (b)(2) of this section. The amount, determined in accordance with the provisions of this section, subject to the levy shall be paid to the district director by the insuring organization promptly after receipt of the notification described in paragraph (b)(2). The satisfaction of a levy with respect to a life insurance or endowment contract will not discharge the contract from the tax lien. However, see section 6323(b)(9)(C) and the regulations thereunder concerning the liability of an insurance company after satisfaction of a levy with respect to a life insurance or endowment contract. If the person against whom the tax is assessed so directs, the insuring organization, on a date before the 90th day after service of the notice by levy, may satisfy the levy by paying over an amount computed in accordance with the provisions of this subparagraph substituting such date for the 90th day. In the event of termination of the policy by the taxpayer or by the death of the insured on a date before the 90th day after service of the notice of levy, the amount to be paid over to the district director by the insuring organization in satisfaction of the levy shall be an amount computed in accordance with the provisions of this subparagraph substituting the date of termination of the policy or the date of death for the 90th day.

(2) Examples. The provisions of this section may be illustrated by the following examples:

Example (1). On March 5, 19 68, a notice of levy for an unpaid income tax assessment due from A in the amount of $3,000 is served on the X Insurance Company with respect to A's life insurance policy. On March 5, 19 68, the cash loan value of the policy is $1,500. On April 9, 19 68, A does not pay a premium due on the policy in the amount of $200. Under an automatic premium advance provision contained in the policy originally issued in 1960, X advances the premium out of the cash value of the policy. As of June 3, 19 68 (the 90th day after service of the notice of levy), pursuant to the provisions of the policy, the amount of accrued charges upon the automatic premium advance in the amount of $200 for the period April 9, 19 68, through June 3, 19 68, is $2. On June 5, 19 68, the district director gives written notification to X indicating that A's unpaid tax assessment is $2,500. Under this section, X is required to pay to the district director, promptly after receipt of the June 5, 19 68, notification, the sum of $1,298 ($1,500 less $200 less $2), which is the amount A could have had advanced to him by X on June 3, 19 68.

Example (2). Assume the same facts as in example (1) except that on May 10, 19 68, A requests and X grants an advance in the amount of $1,000. X has actual notice of the existence of the lien by reason of the service of the notice of levy on March 5, 19 68. This advance is not required to be made automatically under the policy and reduces the amount of the cash value of the policy. For the use of the $1,000 advance during the period May 10, 19 68, through June 3, 19 68, X charges A the sum of $3. Under this section, X is required to pay to the district director, promptly after receipt of the June 5, 19 68, notification, the sum of $1,298. This $1,298 amount is composed of the $295 amount ($1,500 less $200 less $2 less $1,000 less $3) A could have had advanced to him by X on June 3, 19 68, plus the $1,000 advance plus the charges in the amount of $3 with respect thereto.

Example (3). Assume the same facts as in example (1) except that the insurance contract does not contain an automatic premium advance provision. The contract does provide that, upon default in the payment of premiums, the policy shall automatically be converted to paid-up term insurance with no cash or loan value. A fails to make the premium payment of $200 due on April 9, 19 68. After expiration of a grace period to make the premium payment, the X Insurance Company applies the cash loan value of $1,500 to effect the conversion. Since the service of the notice of levy constitutes the exercise of A's right to receive the cash loan value and the amount applied to effect the conversion is not an automatic advance to A to maintain the policy in force, the conversion of the policy is not an event which will release the cash loan value from the effect of the levy. Therefore, X Insurance Company is required to pay to the district director, promptly after receipt of the June 5, 19 68 notification, the sum of $1,500.

(d) Other enforcement proceedings. The satisfaction of the levy described in paragraph (b) of this section by an insuring organization shall be without prejudice to any civil action for the enforcement of any Federal tax lien with respect to a life insurance or endowment contract. Thus, this levy procedure is not the exclusive means of subjecting the life insurance and endowment contracts of the person against whom a tax is assessed to the collection of his unpaid assessment. The United States may choose to foreclose the tax lien in any case where it is appropriate, as, for example, to reach the cash surrender value (as distinguished from the cash loan value) of a life insurance or endowment contract.

(e) Cross references. (1) For provisions relating to priority of certain advances with respect to a life insurance or endowment contract after satisfaction of a levy pursuant to section 6332(b), see section 6323(b)(9) and the regulations thereunder.

(2) For provisions relating to the issuance of a certificate of discharge of a life insurance or endowment contract subject to a tax lien, see section 6325(b) and the regulations thereunder.

PAR . 6. Section 301.6334 is amended by revising section 6334(a)(4), by adding new paragraphs (6) and (7) to section 6334(a), by revising the historical note to section 6334, and by deleting all statutory material and historical notes following the historical note to section 6334. The amended and added provisions read as follows:

301.6334 Statutory provisions; property exempt from levy.

Sec. 6334. Property exempt from levy--(a) Enumeration. * * *

(4) Unemployment benefits. Any amount payable to an individual with respect to his unemployment (including any portion thereof payable with respect to dependents) under an unemployment compensation law of the United States, or any State, or of the District of Columbia or of the Commonwealth of Puerto Rico.

* * * * *

(6) Certain annuity and pension payments. Annuity or pension payments under the Railroad Retirement Act, benefits under the Railroad Unemployment Insurance Act, special pension payments received by a person whose name has been entered on the Army, Navy, Air Force, and Coast Guard Medal of Honor roll (38 U.S.C. 562), and annuities based on retired or retainer pay under chapter 73 of title 10 of the United States Code.

(7) Workmen's compensation. Any amount payable to an individual as workmen's compensation (including any portion thereof payable with respect to dependents) under a workmen's compensation law of the United States, any State, the District of Columbia, or the Commonwealth of Puerto Rico.

* * * * *

[Sec. 6334 as amended by section 406, Social Security Amendments 1958 (72 Stat. 1047) [P.L. 85-840, C.B. 1958-3, 85]; sec. 812, Excise Tax Reduction Act of 1965 (79 Stat. 170) [P.L. 89-44, C.B. 1965-2, 568]; sec. 104(c), Federal Tax Lien Act of 1966 (80 Stat. 1137) [P.L. 89-719, C.B. 1966-2, 623]]

PAR . 7. Section 301.6334 -1 is amended by revising subparagraphs (2), (3) and (4) of paragraph (a), by adding new subparagraphs (6) and (7) to paragraph (a), and by revising paragraph (c). These amended and added provisions read as follows:

301.6334-1 Property exempt from levy.

(a) Enumeration. * * *

(2) Fuel, provisions, furniture, and personal effects. If the taxpayer is the head of a family, so much of the fuel, provisions, furniture, and personal effects in his household, and of the arms for personal use, livestock, and poultry of the taxpayer, as does not exceed $500 in value. For purposes of this provision, an individual who is the only remaining member of a family and who lives alone is not the head of a family.

(3) Books and tools of a trade, business or profession. So many of the books and tools necessary for the trade, business, or profession of an individual taxpayer as do not exceed in the aggregate $250 in value.

(4) Unemployment benefits. Any amount payable to an individual with respect to his unemployment (including any portion thereof payable with respect to dependents) under an unemployment compensation law of the United States, of any State, or of the District of Columbia or of the Commonwealth of Puerto Rico.

* * * * *

(6) Certain annuity and pension payments. Annuity or pension payments under the Railroad Retirement Act (45 U.S.C. ch. 9), benefits under the Railroad Unemployment Insurance Act (45 U.S.C. ch. 11), special pension payments received by a person whose name has been entered on the Army, Navy, Air Force, and Coast Guard Medal of Henor roll (38 U.S.C. 562), and annuities based on retired or retainer pay under chapter 73 of title 10 of the United States Code.

(7) Workmen's compensation. Any amount payable to an individual as workmen's compensation (including any portion thereof payable with respect to dependents) under a workmen's compensation law of the United States, any State, the District of Columbia, or the Commonwealth of Puerto Rico.

* * * * *

(c) Other property. No other property or rights to property are exempt from levy except the property specifically exempted by section 6334(a). No provision of a State law may exempt property or rights to property from levy for the collection of any Federal tax. Thus, property exempt from execution under State personal or homestead exemption laws is, nevertheless, subject to levy by the United States for collection of its taxes.

PAR . 8. Section 301.6335 is amended by revising section 6335(b) and by adding a historical note. These amended and added provisions read as follows:

301.6335 Statutory provisions; sale of seized property.

Sec. 6335. Sale of seized property. * * *

(b) Notice of sale. The Secretary or his delegate shall as soon as practicable after the seizure of the property give notice to the owner, in the manner prescribed in subsection (a), and shall cause a notification to be published in some newspaper published or generally circulated within the county wherein such seizure is made, or if there be no newspaper published or generally circulated in such county, shall post such notice at the post office nearest the place where the seizure is made, and in not less than two other public places. Such notice shall specify the property to be sold, and the time, place, manner, and conditions of the sale thereof. Whenever levy is made without regard to the 10-day period provided in section 6331(a), public notice of sale of the property seized shall not be made within such 10-day period unless section 6336 (relating to sale of perishable goods) is applicable.

* * * * *

[Sec. 6335 as amended by sec. 104(d), Federal Tax Lien Act of 1966 (80 Stat. 1137) [P.L. 89-719, C.B. 1966-2, 623]]

PAR . 9. Paragraph (b)(1) of 301.6335-1 is amended to read as follows:

301.6335-1 Sale of seized property.

* * * * *

(b) Notice of sale. (1) As soon as practicable after seizure of the property, the district director shall give notice of sale in writing to the owner. Such notice shall be delivered to the owner or left at his usual place of abode or business if located within the internal revenue district where the seizure is made. If the owner cannot be readily located, or has no dwelling or place of business within such district, the notice may be mailed to his last known address. The notice shall specify the property to be sold, and the time, place, manner, and conditions of the sale thereof, and shall expressly state that only the right, title, and interest of the delinquent taxpayer in and to such property is to be offered for sale. The notice shall also be published in some newspaper published in the county wherein the seizure is made or in a newspaper generally circulated in that county. For example, if a newspaper of general circulation in a county but not published in that county will reach more potential bidders for the property to be sold than a newspaper published within the county, or if there is a newspaper of general circulation within the county but no newspaper published within the county, the district director may cause public notice of the sale to be given in the newspaper of general circulation within the county. If there is no newspaper published or generally circulated in the county, the notice shall be posted at the post office nearest the place where the seizure is made, and in not less than two other public places.

* * * * *

PAR . 10. Section 301.6337 is amended by revising section 6337(b)(1) and by adding a historical note. These revised and added provisions read as follows:

301.6337 Statutory provisions; redemption of property.

Sec. 6337. Redemption of property. * * *

(b) Redemption of real estate after sale--(1) Period. The owners of any real property sold as provided in section 6335, their heirs, executors, or administrators, or any person having any interest therein, or a lien thereon, or any person in their behalf, shall be permitted to redeem the property sold, or any particular tract of such property, at any time within 120 days after the sale thereof.

* * * * *

[Sec. 6337 as amended by sec. 104(e), Federal Tax Lien Act of 1966 (80 Stat. 1137) [P.L. 89-719, C.B. 1966-2, 623]]

PAR . 11. Paragraph (b)(1) of 301.6337-1 is amended to read as follows:

301.6337-1 Redemption of property.

* * * * *

(b) Redemption of real estate after sale--(1) Period. The owner of any real estate sold as provided in section 6335, his heirs, executors, or administrators, or any person having any interest therein, or a lien thereon, or any person in their behalf, shall be permitted to redeem the property sold, or any particular tract of such property, at any time within 120 days after the sale thereof.

* * * * *

PAR . 12. Section 301.6338 is amended by revising section 6338(c) and by revising the historical note. These amended provisions read as follows:

301.6338 Statutory provisions; certificate of sale; deed of real property.

Sec. 6338. Certificate of sale; deed of real property. * * *

(c) Real property purchased by United States. If real property is declared purchased by the United States at a sale pursuant to section 6335, the Secretary or his delegate shall at the proper time execute a deed therefor, and without delay cause such deed to be duly recorded in the proper registry of deeds.

[Sec. 6338 as amended by sec. 78, Technical Amendments Act 1958 (72 Stat. 1662) [P.L. 85-866, C.B. 1958-3, 254]; sec. 104(f), Federal Tax Lien Act of 1966 (80 Stat. 1137) [P.L. 89-719, C.B. 1966-2, 623]]

PAR . 13. Paragraph (c) of 301.6338-1 is amended to read as follows:

301.6338-1 Certificate of sale; deed of real property.

* * * * *

(c) Deed to real property purchased by the United States. If real property is declared purchased by the United States at a sale pursuant to section 6335, the district director shall at the proper time execute a deed therefor and shall, without delay, cause the deed to be duly recorded in the proper registry of deeds.

PAR . 14. Section 301.6339 is amended by adding new subsections (c) and (d) to section 6339 and by revising the historical note. These added and amended provisions read as follows:

301.6339 Statutory provisions; legal effect of certificate of sale of personal property and deed of real property.

Sec. 6339. Legal effect of certificate of sale of personal property and deed of real property. * * *

(c) Effect of junior encumbrances. A certificate of sale of personal property given or a deed to real property executed pursuant to section 6338 shall discharge such property from all liens, encumbrances, and titles over which the lien of the United States with respect to which the levy was made had priority.

(d) Cross references. (1) For distribution of surplus proceeds, see section 6342(b).

(2) For judicial procedure with respect to surplus proceeds, see section 7426(a)(2).

[Sec. 6339 as amended by sec. 79, Technical Amendments Act 1958 (72 Stat. 1662) [P.L. 85-866, C.B. 1958-3, 254]; sec. 104(g), Federal Tax Lien Act of 1966 (80 Stat. 1137) [P.L. 89-719, C.B. 1966-2, 623]]

Par. 15. Section 301.6339 -1 is amended by adding new paragraph (c) which reads as follows:

301.6339-1 Legal effect of certificate of sale of personal property and deed of real property.

* * * * *

(c) Effect of junior encumbrances. A certificate of sale of personal property given or a deed to real property executed pursuant to section 6338 discharges the property from all liens, encumbrances, and titles over which the lien of the United States, with respect to which the levy was made, has executed after a notice of a federal tax lien has been filed is extinguished when the district director executes a deed to the real property to a purchaser thereof at a sale pursuant to section 6335 following the seizure of the property by the United States. The proceeds of such a sale are distributed in accordance with priority of the liens, encumbranches, or titles. See section 6342(b) and the regulations thereunder for provisions relating to the distribution of surplus proceeds. See section 7426(a)(2) and the regulations thereunder for judicial procedures with respect to surplus proceeds.

PAR . 16. Section 301.6342 is amended by revising section 6342(a) (other than paragraph (2) thereof) and by adding a historical note. These amended and added provisions read as follows:

301.6342 Statutory provisions; application of proceeds of levy.

Sec. 6342. Application of proceeds of levy--(a) Collection of liability. Any money realized by proceedings under this subchapter (whether by seizure, by surrender under section 6332 (except pursuant to subsection (c)(2) thereof), or by sale of seized property) or by sale of property redeemed by the United States (if the interest of the United States in such property was a lien arising under the provisions of this title) shall be applied as follows:

(1) Expense of levy and sale. First, against the expenses of the proceedings;

* * * * *

(3) Liability of delinquent taxpayer. The amount, if any, remaining after applying paragraphs (1) and (2) shall then be applied against the liability in respect of which the levy was made or the sale was conducted.

* * * * *

[Sec. 6342 as amended by sec. 104(h), Federal Tax Lien Act of 1966 (80 Stat. 1137) [P.L. 89-719, C.B. 1966-2, 623]]

PAR . 17. Paragraph (a) (other than subparagraph (2) thereof) of 301.6342-1 is amended to read as follows:

301.6342-1 Application of proceeds of levy.

(a) Collection of liability. Any money realized by proceedings under subchapter D, chapter 64, of the Code or by sale of property redeemed by the United States (if the interest of the United States in the property was a lien arising under the provisions of the Internal Revenue Code) is applied in the manner specified in subparagraphs (1), (2), and (3) of this paragraph. Money realized by proceedings under subchapter D, chapter 64, of the Code includes money realized by seizure, by sale of seized property, or by surrender under section 6332 (except money realized by the imposition of a 50% penalty pursuant to section 6332(c)(2)).

(1) Expense of levy and sale. First, against the expenses of the proceedings or sale, including expenses allowable under section 6341 and amounts paid by the United States to redeem property.

* * * * *

(3) Liability of delinquent taxpayer. The amount, if any, remaining after applying subparagraphs (1) and (2) of this paragraph shall then be applied against the liability in respect of which the levy was made or the sale of redeemed property was conducted.

* * * * *

PAR . 18. Section 301.6343 is amended by revising section 6343 and by adding a historical note. These amended and added provisions read as follows:

301.6343 Statutory provisions; authority to release levy and return property.

Sec. 6343. Authority to release levy and return property--(a) Release of levy. It shall be lawful for the Secretary or his delegate, under regulations prescribed by the Secretary or his delegate, to release the levy upon all or part of the property or rights to property levied upon where the Secretary or his delegate determines that such action will facilitate the collection of the liability, but such release shall not operate to prevent any subsequent levy.

(b) Return of property. If the Secretary or his delegate determines that property has been wrongfully levied upon, it shall be lawful for the Secretary or his delegate to return--

(1) The specific property levied upon,

(2) An amount of money equal to the amount of money levied upon, or

(3) An amount of money equal to the amount of money received by the United States from a sale of such property.

Property may be returned at any time. An amount equal to the amount of money levied upon or received from such sale may be returned at any time before the expiration of 9 months from the date of such levy. For purposes of paragraph (3), if property is declared purchased by the United States at a sale pursuant to section 6335(e) (relating to manner and conditions of sale), the United States shall be treated as having received an amount of money equal to the minimum price determined pursuant to such section or (if larger) the amount received by the United States from the resale of such property.

[Sec. 6343 as amended by sec. 104(i), Federal Tax Lien Act of 1966 (80 Stat. 1138) [P.L. 89-719, C.B. 1966-2, 623]]

PAR . 19. Section 301.6343 -1 is amended to read as follows:

301.6343-1 Authority to release levy and return property.

(a) Release of levy--(1) Authority. The district director may release the levy upon all or part of the property or rights to property levied upon as provided in subparagraphs (2) and (3) of this paragraph. A levy may be released under subparagraph (2) of this paragraph only if the delinquent taxpayer complies with such of the conditions thereunder as the district director may require and if the district director determines that such action will facilitate the collection of the liability. A release pursuant to subparagraph (3) of this paragraph is considered to facilitate the collection of the liability. The release under this section shall not operate to prevent any subsequent levy.

(2) Conditions for release. The district director may release the levy as authorized under subparagraph (1) of this paragraph, if--

(i) Escrow arrangement. The delinquent taxpayer offers a satisfactory arrangement, which is accepted by the district director, for placing property in escrow to secure the payment of the liability (including the expenses of levy) which is the basis of the levy.

(ii) Bond. The delinquent taxpayer delivers an acceptable bond to the district director conditioned upon the payment of the liability (including the expenses of levy) which is the basis of the levy. Such bond shall be in the form provided in section 7101 and 301.7101-1.

(iii) Payment of amount of U.S. interest in the property. There is paid to the district director an amount determined by him to be equal to the interest of the United States in the seized property or the part of the seized property to be released.

(iv) Assignment of salaries and wages. The delinquent taxpayer executes an agreement directing his employer to pay to the district director amounts deducted from the employee's wages on a regular, continuing, or periodic basis, in such manner and in such amount as is agreed upon with the district director, until the full amount of the liability is satisfied, and such agreement is accepted by the employer.

(v) Installment payment arrangement. The delinquent taxpayer makes satisfactory arrangements with the district director to pay the amount of the liability in installments.

(vi) Extension of statute of limitations. The delinquent taxpayer executes an agreement to extend the statute of limitations in accordance with section 6502(a)(2) and 301.6502-1.

(3) Release where value of interest of United States is insufficient to meet expenses of sale. The district director may release the levy as authorized under subparagraph (1) of this paragraph if he determines that the value of the interest of the United States in the seized property, or in the part of the seized property to be released, is insufficient to cover the expenses of the sale of such property.

(b) Return of property--(1) General rule. If the district director determines that property has been wrongfully levied upon, the district director may return--

(i) The specific property levied upon,

(ii) An amount of money equal to the amount of money levied upon (without interest), or

(iii) An amount of money equal to the amount of money received by the United States from a sale of the property (without interest).

If the United States is in possession of specific property, the property may be returned at any time. An amount equal to the amount of money levied upon or received from a sale of the property may be returned at any time before the expiration of 9 months from the date of the levy. When a request described in subparagraph (2) of this paragraph is filed for the return of property before the expiration of 9 months from the date of levy, an amount of money may be returned after a reasonable period of time subsequent to the expiration of the 9-month period if necessary for the investigation and processing of such request. In cases where money is specifically identifiable, as in the case of a coin collection which may be worth substantially more than its face value, the money will be treated as specific property and, whenever possible, this specific property will be returned. For purposes of subparagraph (1)(iii) of this paragraph, if property is declared purchased by the United States at a sale pursuant to section 6335(e), the United States is treated as having received an amount of money equal to the minimum price determined by the district director before the sale or, if larger, the amount received by the United States from the resale of the property.

(2) Request for return of property. A written request for the return of property wrongfully levied upon shall be addressed to the district director (marked for the attention of the chief, special procedures staff) for the internal revenue district in which the levy was made. The written request shall contain the following information:

(i) The name and address of the person submitting the request,

(ii) A detailed description of the property levied upon,

(iii) A description of the claimant's basis for claiming an interest in the property levied upon, and

(iv) The name and address of the taxpayer, the originating internal revenue district, and the date of lien or levy as shown on the Notice of Tax Lien (Form 668), Notice of Levy (Form 668-A), or Levy (Form 668-B) or, in lieu thereof, a statement of the reasons why such information cannot be furnished.

(3) Inadequate request. Any request made prior to June 1, 1972 , which apprises the Internal Revenue Service of the claimant's demand for the return of property wrongfully levied upon shall be considered adequate. A request made after May 31, 1972 , shall not be considered adequate unless it is a written request containing the information required by subparagraph (2) of this paragraph. However, unless a notification is mailed by the district director to the claimant within 30 days of receipt of the request to inform the claimant of the inadequacies, any written request shall be considered adequate. If the district director timely notifies the claimant of the inadequacies of his request, the claimant shall have 30 days from the receipt of the notification of inadequacy to supply in writing any omitted information. Where the omitted information is so supplied within the 30-day period, the request shall be considered to be adequate from the time the original request was made for purposes of determining the applicable period of limitation upon suit under section 6532(c).

(This Treasury decision is issued under the authority contained in section 7805 of the Internal Revenue Code of 1954 (68A Stat. 917; 26 U.S.C. 7805).)

JOHNNIE M. WALTERS,
Commissioner of Internal Revenue.

Approved April 7, 1972 .
FREDERIC W. HICKMAN,
Acting Assistant Secretary of the Treasury.

Federal Register Cite: 37 F.R. 7316
Federal Register Publication Date: April 13, 1972

---------- [Footnotes] ----------

 

1 The publication of this Treasury Decision in 37 F.R. 7316, dated April 13, 1972 , contains (1) instructions for modifying the notice of proposed rulemaking published in 36 F.R. 17349, dated August 28, 1971 , and (2) the full context of the regulations with modifications. As here published, the Treasury Decision reflects the full context of such regulations, with modifications. The individual instructions have been omitted.

 

T.D. 7253, 1973-1 CB 600


Section 6331.--Levy and Distraint
26 CFR 301.6331 : Statutory provisions; levy and distraint.
TITLE 26--INTERNAL REVENUE.--SUBCHAPTER A, PART 301.--REGULATIONS ON PROCEDURE AND ADMINISTRATION



Levies on salaries and wages

DEPARTMENT OF THE TREASURY,
OFFICE OF COMMISSIONER OF INTERNAL REVENUE,
Washington, D.C. 20224.

To Officers and Employees of the Internal Revenue Service and Others Concerned:

Preamble

On October 11, 1972 , a notice of proposed rule making was published in the Federal Register (37 F.R. 21442) to revise the rules relating to levies on salaries and wages. After consideration of all such relevant matter as was presented by interested persons regarding the rules proposed, the amendments are hereby adopted as proposed.

Amendments to the Regulations

In order to provide regulations under section 6331(d) of the Internal Revenue Code of 1954 as added by section 211 of the Revenue Act of 1971 (85 Stat. 520) [P.L. 92-178, 1972-1 C.B. 443], the Regulations on Procedure and Administration (26 CFR Part 301) are amended as follows:

Paragraph 1. Section 301.6331 is amended by redesignating subsection (d) as (e), by adding a new subsection (d) immediately after subsection (c), and by revising the historical note. As amended, these redesignated, added, and revised provisions read as follows:

301.6331 Statutory provisions; levy and distraint.

Sec. 6331. Levy and distraint * * *

(d) Salary and wages--(1) In general. Levy may be made under subsection (a) upon the salary or wages of an individual with respect to any unpaid tax only after the Secretary or his delegate has notified such individual in writing of his intention to make such levy. Such notice shall be given in person, left at the dwelling or usual place of business of such individual, or shall be sent by mail to such individual's last known address, no less than 10 days before the day of levy. No additional notice shall be required in the case of successive levies with respect to such tax.

(2) Jeopardy. Paragraph (1) shall not apply to a levy if the Secretary or his delegate has made a finding under the last sentence of subsection (a) that the collection of tax is in jeopardy.

(e) Cross references. (1) For provisions relating to jeopardy, see subchapter A of chapter 70.

(2) For proceedings applicable to sale of seized property, see section 6335.

[Section 6331 as amended by sec. 104(a), Federal Tax Lien Act 1966 (80 Stat. 1135) [P.L. 89-719, 1966-2 C.B. 623]; sec. 211(a) Revenue Act 1971 (85 Stat. 520)]

Par. 2. Section 301.6331 -1 is amended by adding at the end thereof the following new paragraph:

301.6331-1 Levy and distraint.

* * * * *

(C) Notice of intent to levy on salary or wages--(1) In general. Levy may be made under this section upon the salary or wages of an individual with respect to any unpaid tax only after the district director or the director of the service center has notified such individual in writing of his intention to make such levy. Such notice shall be given in person, left at the dwelling or usual place of business of such individual, or shall be sent by mail to such individual's last known address, no less than ten days before the day of levy. If a notice has been given under this paragraph with respect to an unpaid tax, no further notice is required in the case of successive levies with respect to such unpaid tax. The notice required to be given under this paragraph is in addition to, and may be given at the same time as, the notice and demand described in 301.6303-1.

(2) Jeopardy. Subparagraph (1) of this paragraph shall not apply to a levy if the district director or director of the service center has made a finding under paragraph (a)(2) of this section that the collection of tax is in jeopardy.

(3) Effective date. This paragraph shall apply with respect to levies made after March 31, 1972 .

(This Treasury decision is issued under the authority contained in section 7805 of the Internal Revenue Code of 1954 (68A Stat. 917; 26 U.S.C. 7805).)

JOHNNIE M. WALTERS,
Commissioner of Internal Revenue.

Approved February 17, 1973.
JOHN H. HALL ,
Deputy Assistant Secretary of the Treasury.

 

T.D. 8939 T.D. 8939

I.R.B. 2001-12, 899 (March 19, 2001)


[Code Sec. 468A, 503, 547, 856, 860, 992, 6081, 6110, 6212, 6303, 6305, 6320, 6325, 6330, 6331, 6332, 6335, 6503, 6672, 6903]

Deficiency: Notice of: Taxpayer's last known address.

 

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[TD 8939]

RIN 1545-AX13

Definition of Last Known Address
AGENCY: Internal Revenue Service ( IRS ), Treasury.
ACTION: Final and temporary regulations.
SUMMARY: This document contains final regulations defining last known address in relation to the mailing of notices of deficiency and other notices, statements, and documents sent to a taxpayer's last known address. The final regulations affect taxpayers who receive notices of deficiency and other notices, statements, and documents sent to taxpayers' last known addresses.
DATES: Effective date: These regulations are effective January 12, 2001 .

Applicability date: For dates of applicability, see 301.6212-2(d).

FOR FURTHER INFORMATION CONTACT: Charles A. Hall, (202) 622-4940 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to the Regulations on Procedure and Administration (26 CFR part 301) under section 6212(b) relating to the sufficiency of a notice of deficiency if it is mailed to the last known address of a taxpayer. This document also contains amendments to the Income Tax Regulations (26 CFR part 1) and the Regulations on Procedure and Administration (26 CFR part 301) to provide cross-references to the last known address rules under section 6212(b) in order to apply those rules to other notices, statements, and documents required to be sent to the last known address of a taxpayer.

A notice of proposed rulemaking ( REG -104939-99) was published in the Federal Register (64 FR 63768) on November 22, 1999 . No public hearing was requested or held. Three written comments were received. After consideration of the comments, the proposed regulations are adopted as modified by this Treasury decision. The comments are discussed below.

Explanation of Revisions

Under the proposed regulations, the IRS would have accessed the United States Postal Service (USPS) National Change of Address database (NCOA database) annually to update all taxpayer address records maintained in the IRS 's automated masterfile for purposes of updating the IRS 's mailing list. The IRS 's mailing list contains the last known address for each taxpayer. In addition, prior to mailing correspondence to any particular taxpayer from an IRS Service Center, the IRS would have accessed the NCOA database to update the taxpayer's last known address. Employees mailing correspondence from one of the district offices would have accessed an updated address by virtue of the annual update of the entire masterfile. Except in the case of certain joint filers, the annual update was scheduled to occur in May 2000, November 2000, and every November thereafter. The update based on correspondence mailed from an IRS Service Center was scheduled to begin May 2000. All steps necessary to implement the proposed regulations were not completed by May 2000. Therefore, the IRS delayed use of the NCOA database to update a taxpayer's last known address. See Announcement 2000-49 (2000-19 I.R.B. 998 (May 8, 2000)).

The procedures for updating taxpayer address records maintained in the IRS 's automated masterfile are modified by these regulations. Implementing the proposed procedures for updating a taxpayer's last known address upon the mailing of correspondence from a Service Center required complicated programming that resulted in the delay in finalizing the proposed regulations. In addition, one commentator on the proposed regulations noted that the difference in treatment for Service Center mailings and district office mailings might cause confusion for taxpayers. The IRS , in conjunction with the USPS, has developed an improved system for updating taxpayer addresses that is intended to be easier to implement and operate and minimize confusion.

To gain access to the NCOA database, the IRS has become a limited licensee of the NCOA database. The NCOA database is a computerized record of changes of address maintained by the USPS. This database retains address changes for a thirty-six month period. As a limited licensee, the IRS will receive from the USPS a copy of the entire thirty-six month NCOA database. The IRS 's copy of the NCOA database will be retained at the Martinsburg Computing Center ( MCC ) in Martinsburg, West Virginia. Additionally, the IRS will receive weekly updates to the NCOA database. The updates will contain the most recent changes of address submitted to the USPS. The IRS will update its copy of the full NCOA database with the most recent changes of address in the weekly update.

Beginning in January 2001, the IRS will access the NCOA database to update taxpayer address records maintained in the IRS 's automated masterfile for purposes of updating the IRS 's mailing list. The IRS plans to undertake two different procedures in order to assure the most comprehensive update of taxpayer addresses.

First, the IRS will compare taxpayer addresses in IRS 's records to the most recent changes of address contained in the weekly updates to the NCOA database received from the USPS. To accomplish this, the IRS will use the USPS's FASTCheck system. The FASTCheck System works by comparing key elements of existing taxpayer address information maintained in IRS records to an extract of the same elements from the weekly updates to the NCOA. The key address elements used by IRS to detect possible matches include primary house number, secondary number, secondary designator, and nine digit zip code. If there is a match between the key address elements from IRS records and the key address elements from the weekly update to the NCOA database, the IRS will then compare the taxpayer's complete address information in IRS records to the full NCOA database to determine if there is a change of address for a taxpayer. If the taxpayer's name and last known address in IRS records match the taxpayer's name and old mailing address contained in the NCOA database, the new address in the NCOA database is the taxpayer's last known address, unless the IRS is given clear and concise notification of a different address. A match will only be made if the taxpayer's name in IRS records is the same, within certain tolerances, as is found in the NCOA database. There may be a delay of up to two to three weeks from the date a taxpayer notifies the USPS that his or her change of address is effective and the time the new address is posted to the IRS 's automated masterfile.

In addition, the IRS plans to annually compare all taxpayer address records maintained in the IRS 's automated masterfile with the full thirty-six month NCOA database for purposes of updating the IRS 's mailing list. The IRS will begin comparing all taxpayer address records with the full NCOA database for the first time in January 2001. If the taxpayer's name and last known address in IRS records match the taxpayer's name and old mailing address contained in the NCOA database, the new address in the NCOA database is the taxpayer's last known address, unless the IRS is given clear and concise notification of a different address. As with the weekly updates, the names must be the same, within certain tolerances, in both the IRS 's records and the NCOA database. Matching all taxpayer address records to the full NCOA database will take several months. The next annual update will be completed by September 30, 2002 , and every September 30th thereafter if the IRS determines that subsequent annual updates are necessary in addition to the weekly updates.

For taxpayers who file joint income tax returns under section 6013, the IRS 's automated masterfile is currently only able to retain one address. Beginning with the processing of tax year 2000 joint income tax returns, the IRS 's automated masterfile will be able to retain a second address. Therefore, if the NCOA database contains change of address information for only one spouse from a joint return, the rules of this regulation will not apply to notices, statements, and other documents mailed before the processing of the taxpayers' tax year 2000 joint income tax return.

Summary of Comments

Commentators also suggested that these regulations refer to section 6672(b)(1) and section 4103. Because section 6672(b)(1) requires that the IRS mail notices to the taxpayer's last known address, a cross-reference under 301.6672-1 has been added to these regulations. However, because section 4103 does not require the IRS to mail notices to the taxpayer's last known address, no cross-reference is necessary.

A third commentator suggested that the IRS coordinate these regulations with Rev. Proc. 90-18 (1990-1 C.B. 491). Rev. Proc. 90-18 will be updated to incorporate changes made by these final regulations and to provide rules for oral notification of a change of address, additional tax forms from which taxpayer addresses will be updated, and additional Internal Revenue Code sections that require a notice be sent to a taxpayer's last known address.

The commentator also asked what is the most recently filed return for purposes of 301.6212-2(a) of the regulations, i.e., whether different returns filed by the same taxpayer will update the taxpayer's last known address. The rules provided in these regulations do not in any way alter the existing rules for updating a taxpayer's last known address from a filed return. Section 5.01 of Rev. Proc. 90-18 provides which returns will update a taxpayer's last known address under a social security number or an employer identification number. Therefore, an amended return filed on a Form 1040X with a different address from that which appeared on the taxpayer's previously filed Form 1040 will update the taxpayer's last known address of record with the IRS . However, a Form 941 filed by a Schedule C business would not update the address for the taxpayer's individual income tax account as the Form 941 is filed with an employer identification number and the individual income tax account is associated with the taxpayer's social security number.

Finally, as mentioned above, the commentator noted that accessing the NCOA database for IRS Service Center mailings but not for district office mailings might cause confusion for taxpayers. As the procedures for updating taxpayer addresses are modified by these final regulations, there is no longer any difference between Service Center and other field or area office mailings.

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Drafting Information

The principal author of these regulations is Charles A. Hall of the Office of Associate Chief Counsel, Procedure and Administration (Administrative Provisions and Judicial Practice Division). However, other personnel from the IRS and Treasury Department participated in their development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 301 are amended as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. In 1.468A-5, paragraph (c)(1)(ii) is amended by adding a sentence at the end of the paragraph to read as follows:

1.468A-5 Nuclear decommissioning fund qualification requirements; prohibitions against self-dealing; disqualification of nuclear decommissioning fund; termination of fund upon substantial completion of decommissioning.

* * * * *

(c) * * *

(1) * * *

(ii) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter.

* * * * *

Par. 3. In 1.503(a)-1, paragraph (c) concluding text is amended by adding a sentence at the end of the paragraph to read as follows:

1.503(a)-1 Denial of exemption to certain organizations engaged in prohibited transactions.

* * * * *

(c) * * *

* * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter.

* * * * *

Par. 4. In 1.547-2, paragraph (b)(1)(v) is amended by adding a sentence after the third sentence of the paragraph to read as follows:

1.547-2 Requirements for deficiency dividends.

* * * * *

(b) * * *

(1) * * *

(v) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter. * * *

* * * * *

Par. 5. In 1.856-6, paragraph (g)(5) is amended by adding a sentence after the first sentence of the paragraph to read as follows:

1.856-6 Foreclosure property.

* * * * *

(g) * * *

(5) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter. * * *

* * * * *

Par. 6. In 1.860-2, paragraph (b)(1)(ii) is amended by adding a sentence after the fourth sentence of the paragraph to read as follows:

1.860-2 Requirements for deficiency dividends.

* * * * *

(b) * * *

(1) * * *

(ii) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter. * * *

* * * * *

Par. 7. In 1.963-6, paragraph (c)(5) is amended by adding a sentence after the second sentence of the paragraph to read as follows:

1.963-6 Deficiency distribution.

* * * * *

(c) * * *

(5) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter. * * *

* * * * *

Par. 8. In 1.992-3, paragraph (c)(3)(iv) is amended by adding a sentence after the third sentence of the paragraph to read as follows:

1.992-3 Deficiency distributions to meet qualification requirements.

* * * * *

(c) * * *

(3) * * *

(iv) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter. * * *

* * * * *

Par. 9. In 1.6081-2, paragraph (f) is amended by adding a sentence at the end of the paragraph to read as follows:

1.6081-2 Automatic extension of time to file partnership return of income.

* * * * *

(f) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter.

* * * * *

Par. 10. In 1.6081-3, paragraph (d) is amended by adding a sentence at the end of the paragraph to read as follows:

1.6081-3 Automatic extension of time for filing corporation income tax returns.

* * * * *

(d) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter.

* * * * *

Par. 11. In 1.6081-4, paragraph (c) is amended by adding a sentence at the end of the paragraph to read as follows:

1.6081-4 Automatic extension of time for filing individual income tax returns.

* * * * *

(c) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter.

* * * * *

Par. 12. In 1.6081-6, paragraph (d) is amended by adding a sentence at the end of the paragraph to read as follows:

1.6081-6 Automatic extension of time to file trust income tax return.

* * * * *

(d) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter.

* * * * *

Par. 13. In 1.6081-7, paragraph (d) is amended by adding a sentence at the end of the paragraph to read as follows:

1.6081-7 Automatic extension of time to file Real Estate Mortgage Investment Conduit (REMIC) income tax return.

* * * * *

(d) * * * For further guidance regarding the definition of last known address, see 301.6212-2 of this chapter.

* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

Par. 14. The authority citation for part 301 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 15. In 301.6110-4, paragraph (c)(3) is amended by adding a sentence at the end of the paragraph to read as follows:

301.6110-4 Communications from third parties.

* * * * *

(c) * * *

(3) * * * For further guidance regarding the definition of last known address, see 301.6212-2.

* * * * *

Par. 16. In 301.6110-5, paragraph (b)(4) is amended by adding a sentence at the end of the paragraph to read as follows:

301.6110-5 Notice and time requirements; actions to restrain disclosure; actions to obtain additional disclosure.

* * * * *

(b) * * *

(4) * * * For further guidance regarding the definition of last known address, see 301.6212-2.

* * * * *

Par. 17. In 301.6110-6, paragraph (b)(2)(v) is amended by adding a sentence at the end of the paragraph to read as follows:

301.6110-6 Written determinations issued in response to requests submitted before November 1, 1976 .

* * * * *

(b) * * *

(2) * * *

(v) * * * For further guidance regarding the definition of last known address, see 301.6212-2.

* * * * *

Par. 18. Section 301.6212 -2 is added to read as follows:

301.6212-2 Definition of last known address.

(a) General rule. Except as provided in paragraph (b)(2) of this section, a taxpayer's last known address is the address that appears on the taxpayer's most recently filed and properly processed Federal tax return, unless the Internal Revenue Service ( IRS ) is given clear and concise notification of a different address. Further information on what constitutes clear and concise notification of a different address and a properly processed Federal tax return can be found in Rev. Proc. 90-18 (1990-1 C.B. 491) or in procedures subsequently prescribed by the Commissioner.

(b) Address obtained from third party--(1) In general. Except as provided in paragraph (b)(2) of this section, change of address information that a taxpayer provides to a third party, such as a payor or another government agency, is not clear and concise notification of a different address for purposes of determining a last known address under this section.

(2) Exception for address obtained from the United States Postal Service--(i) Updating taxpayer addresses. The IRS will update taxpayer addresses maintained in IRS records by referring to data accumulated and maintained in the United States Postal Service (USPS) National Change of Address database that retains change of address information for thirty-six months (NCOA database). Except as provided in paragraph (b)(2)(ii) of this section, if the taxpayer's name and last known address in IRS records match the taxpayer's name and old mailing address contained in the NCOA database, the new address in the NCOA database is the taxpayer's last known address, unless the IRS is given clear and concise notification of a different address.

(ii) Duration of address obtained from NCOA database. The address obtained from the NCOA database under paragraph (b)(2)(i) of this section is the taxpayer's last known address until one of the following events occurs--

(A) The taxpayer files and the IRS properly processes a Federal tax return with an address different from the address obtained from the NCOA database; or

(B) The taxpayer provides the Internal Revenue Service with clear and concise notification of a change of address, as defined in procedures prescribed by the Commissioner, that is different from the address obtained from the NCOA database.

(3) Examples. The following examples illustrate the rules of paragraph (b)(2) of this section:

Example 1. (i) A is an unmarried taxpayer. The address on A's 1999 Form 1040, U.S. Individual Income Tax Return, filed on April 14, 2000 , and 2000 Form 1040 filed on April 13, 2001 , is 1234 Anyplace Street, Anytown, USA 43210. On May 15, 2001 , A informs the USPS of a new permanent address (9876 Newplace Street, Newtown, USA 12345) using the USPS Form 3575, "Official Mail Forwarding Change of Address Form." The change of address is included in the weekly update of the USPS NCOA database. On May 29, 2001 , A's address maintained in IRS records is changed to 9876 Newplace Street, Newtown, USA 12345.

(ii) In June 2001 the IRS determines a deficiency for A's 1999 tax year and prepares to issue a notice of deficiency. The IRS obtains A's address for the notice of deficiency from IRS records. On June 15, 2001 , the Internal Revenue Service mails the notice of deficiency to A at 9876 Newplace Street, Newtown, USA 12345. For purposes of section 6212(b), the notice of deficiency mailed on June 15, 2001 , is mailed to A's last known address.

Example 2. (i) The facts are the same as in Example 1, except that instead of determining a deficiency for A's 1999 tax year in June 2001, the IRS determines a deficiency for A's 1999 tax year in May 2001.

(ii) On May 21, 2001 , the IRS prepares a notice of deficiency for A and obtains A's address from IRS records. Because A did not inform the USPS of the change of address in sufficient time for the IRS to process and post the new address in Internal Revenue Service's records by May 21, 2001 , the notice of deficiency is mailed to 1234 Anyplace Street, Anytown, USA 43210. For purposes of section 6212(b), the notice of deficiency mailed on May 21, 2001 , is mailed to A's last known address.

Example 3. (i) C and D are married taxpayers. The address on C and D's 2000 Form 1040, U.S. Individual Income Tax Return, filed on April 13, 2001 , and 2001 Form 1040 filed on April 15, 2002 , is 2468 Spring Street, Little City, USA 97531. On August 15, 2002 , D informs the USPS of a new permanent address (8642 Peachtree Street, Big City, USA 13579) using the USPS Form 3575, "Official Mail Forwarding Change of Address Form." The change of address is included in the weekly update of the USPS NCOA database. On August 29, 2002 , D's address maintained in IRS records is changed to 8642 Peachtree Street, Big City, USA 13579.

(ii) In October 2002 the IRS determines a deficiency for C and D's 2000 tax year and prepares to issue a notice of deficiency. The Internal Revenue Service obtains C's address and D's address for the notice of deficiency from IRS records. On October 15, 2002 , the IRS mails a copy of the notice of deficiency to C at 2468 Spring Street, Little City, USA 97531, and to D at 8642 Peachtree Street, Big City, USA 13579. For purposes of section 6212(b), the notices of deficiency mailed on October 15, 2002 , are mailed to C and D's respective last known addresses.

(c) Last known address for all notices, statements, and documents. The rules in paragraphs (a) and (b) of this section apply for purposes of determining whether all notices, statements, or other documents are mailed to a taxpayer's last known address whenever the term last known address is used in the Internal Revenue Code or the regulations thereunder.

(d) Effective Date--(1) In general. Except as provided in paragraph (d)(2) of this section, this section is effective on January 29, 2001 .

(2) Individual moves in the case of joint filers. In the case of taxpayers who file joint returns under section 6013, if the NCOA database contains change of address information for only one spouse, paragraphs (b)(2) and (3) of this section will not apply to notices, statements, and other documents mailed before the processing of the taxpayers' 2000 joint return.

Par. 19. In 301.6303-1, paragraph (a) is amended by adding a sentence at the end of the paragraph to read as follows:

301.6303-1 Notice and demand for tax.

* * * * *

(a) * * * For further guidance regarding the definition of last known address, see 301.6212-2.

* * * * *

Par. 20. In 301.6305-1, paragraph (b)(2)(ii) is revised to read as follows:

301.6305-1 Assessment and collection of certain liability.

* * * * *

(b) * * *

(2) * * *

(ii) The name, social security number, and last known address of the individual owing the assessed amount. For further guidance regarding the definition of last known address, see 301.6212-2;

* * * * *

Par. 21. In 301.6320-1T, paragraph (a)(1) is amended by adding a sentence at the end of the paragraph to read as follows:

301.6320-1T Notice and opportunity for hearing upon filing of notice of Federal tax lien (temporary).

(a) * * * (1) * * * For further guidance regarding the definition of last known address, see 301.6212-2.

* * * * *

Par. 22. In 301.6325-1, paragraph (f)(2)(ii)(a) is revised to read as follows:

301.6325-1 Release of lien or discharge of property.

* * * * *

(f) * * *

(2) * * *

(ii) * * *

(a) Mailing notice of the revocation to the taxpayer at his last known address (see 301.6212-2 for further guidance regarding the definition of last known address); and

* * * * *

Par. 23. In 301.6330-1T, paragraph (a)(1) is amended by adding a sentence at the end of the paragraph to read as follows:

301.6330-1T Notice and opportunity for hearing prior to levy (temporary).

(a) * * * (1) * * * For further guidance regarding the definition of last known address, see 301.6212-2.

* * * * *

Par. 24. In 301.6331-2, paragraph (a)(1) is amended by adding a sentence after the second sentence of the paragraph to read as follows:

301.6331-2 Procedures and restrictions on levies.

(a) * * * (1) * * * For further guidance regarding the definition of last known address, see 301.6212-2. * * *

* * * * *

Par. 25. Section 301.6332 -2 is amended as follows:

1. Paragraphs (b)(1) introductory text, (b)(1)(i), and (b)(1)(ii) are redesignated as paragraphs (b)(1)(i) introductory text, (b)(1)(i)(A), and (b)(1)(i)(B), respectively.

2. In newly designated paragraph (b)(1)(i)(B), the text beginning with the second sentence is redesignated as paragraph (b)(1)(ii).

3. Newly designated paragraph (b)(1)(ii) is amended by adding a sentence after the second sentence of the paragraph.

The addition reads as follows:

301.6332-2 Surrender of property subject to levy in the case of life insurance and endowment contracts.

* * * * *

(b) * * * (1) In general.

(ii) * * * For further guidance regarding the definition of last known address, see 301.6212-2. * * *

* * * * *

Par. 26. In 301.6335-1, paragraph (b)(1) is amended by adding a sentence after the third sentence of the paragraph to read as follows:

301.6335-1 Sale of seized property.

* * * * *

(b) * * * (1) * * * For further guidance regarding the definition of last known address, see 301.6212-2. * * *

* * * * *

Par. 27. In 301.6503(c)-1, paragraph (a) is amended by adding a sentence at the end of the paragraph to read as follows:

301.6503(c)-1 Suspension of running of period of limitation; location of property outside the United States or removal of property from the United States; taxpayer outside of United States.

(a) * * * For further guidance regarding the definition of last known address, see 301.6212-2.

* * * * *

Par. 28. Section 301.6672 -1 is amended by adding a sentence at the end of the section to read as follows:

301.6672-1 Failure to collect and pay over tax, or attempt to evade or defeat tax.

* * * For further guidance regarding the determination of the proper address for mailing the notice required under section 6672(b)(1), see 301.6212-2.

Par. 29. In 301.6903-1, paragraph (c) is amended by adding a sentence after the first sentence of the paragraph to read as follows:

301.6903-1 Notice of fiduciary relationship.

* * * * *

(c) * * * For further guidance regarding the definition of last known address, see 301.6212-2. * * *

* * * * *

Robert E. Wenzel

Deputy Commissioner of Internal Revenue

Approved: December 11, 2000

Jonathan Talisman

Acting Assistant Secretary of the Treasury

 

T.D. 9027 December 18, 2002
 
Levies: Installment agreements: Statute of limitations. --


DEPARTMENT OF THE TREASURY


Internal Revenue Service

26 CFR Part 301

Levy Restrictions During Installment Agreements

AGENCY: Internal Revenue Service ( IRS ), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final regulations relating to restrictions on levy during the period that an installment agreement is proposed or in effect. The regulations reflect changes to the law made by the Internal Revenue Service Restructuring and Reform Act of 1998.

EFFECTIVE DATE: These regulations are effective [INSERT DATE FINAL REGULATIONS ARE PUBLISHED IN THE FEDERAL REGISTER].

FOR FURTHER INFORMATION CONTACT: Frederick W. Schindler, (202) 622-3620 (not a toll-free number).



SUPPLEMENTARY INFORMATION:



Background

This document contains final regulations amending the Procedure and Administration Regulations (26 CFR part 301) under section 6331 of the Internal Revenue Code (Code). The regulations reflect the amendment of section 6331 by section 3462 of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Public Law 105-206 (112 Stat. 685, 764). New section 6331(k) codifies the IRS practice of withholding collection during consideration of a taxpayer's offer to compromise and extends that practice to proposed installment agreements. These regulations deal principally with the effect of subsection 6331(k) when an installment agreement has been proposed and is pending, is in effect, or has been rejected or terminated. On April 17, 2002, a notice of proposed rulemaking ( REG -104762-00; 67 FR 18839) reflecting these changes was published in the Federal Register. No written comments on the proposed regulations were received. No public hearing was scheduled or held.



Explanation of Provisions

The regulations provide that, subject to certain exceptions, the IRS may not levy to collect a liability while a taxpayer's proposal to enter into an installment agreement for payment of that liability is pending, for thirty days after rejection of such a proposal, while an installment agreement is in effect, for thirty days after termination of an installment agreement by the IRS , and during a timely filed appeal of a rejection or termination by the IRS . A proposed installment agreement is considered pending when it is accepted for processing by the IRS and remains pending until the IRS accepts or rejects it or the taxpayer withdraws the proposal. The final regulations clarify that the IRS may not accept a proposed installment agreement for processing if jurisdiction over the tax liability at issue has been transferred to the Department of Justice for prosecution or defense. If a proposed installment agreement does not contain sufficient information for the IRS to determine whether the proposal should be accepted, the IRS will request the additional necessary information from the taxpayer and provide a reasonable time period for the taxpayer to respond. The IRS may reject the proposed installment agreement if the requested information is not provided.

Collection by levy is not prohibited if the taxpayer waives the restriction on levy in writing, if the IRS determines that collection of the tax liability is in jeopardy, or if the IRS determines that the proposed installment agreement was submitted solely to delay collection. The exception for proposals submitted solely to delay collection is based on the legislative history accompanying RRA 1998, which explained that Congress did not intend that levy would be prohibited if the IRS determined that an offer to compromise was submitted solely to delay collection. H.R. Conf. Rep. No. 509, 105th Cong., 2d Sess. 288 (1998). Because the legislative history indicates that Congress intended the same restrictions on levy with respect to offers in compromise be applicable to installment agreements, these regulations adopt the same rule with respect to proposed installment agreements.

The regulations provide that the IRS may take actions other than levy to protect the interests of the United States with respect to collection of the liability to which an installment agreement or proposed installment agreement relates. Those actions include, but are not limited to: crediting an overpayment against the liability pursuant to section 6402, filing or refiling notices of Federal tax lien, and taking action to collect from persons liable for the tax but not named in the installment agreement.

The proposed regulations provided that the IRS cannot institute a court proceeding against the taxpayer named in the installment agreement to collect the tax covered by the installment agreement. In the final regulations, this provision has been clarified. It now states that the IRS may not refer a case to the Department of Justice to collect an unpaid tax through a judicial proceeding while levy is prohibited by these regulations. The IRS may, however, authorize the Department of Justice to file a counterclaim in any refund proceeding commenced by a taxpayer, participate in bankruptcy or insolvency cases commenced by or against the taxpayer, or join a taxpayer in any other proceeding in which liability for the tax at issue may be established or disputed. Such proceedings may involve taxes for which more than one person may be jointly and severally liable for the same tax, or may involve persons liable for related liabilities, such as a trust fund recovery penalty under section 6672 or a personal liability for excise tax under section 4103.

While an installment agreement allows the IRS to accept the payment of tax in installments, the agreement does not conclusively establish the taxpayer's liability. A taxpayer therefore is not prohibited from seeking a refund of taxes paid pursuant to an installment agreement. Allowing the IRS to join the taxpayer in a proceeding where the liability for the tax may be established or disputed will protect the Government from having to litigate the same tax in multiple forums only to face the argument in each separate case (including, potentially, from the taxpayer named in an installment agreement) that the person or persons not party to that suit were solely or principally liable for non-payment of the taxes at issue. The notice of proposed rulemaking stated that if a judgment was obtained against a taxpayer named in an installment agreement, collection would continue to occur pursuant to the terms of the installment agreement. The final regulations clarify that this statement applies only when the Department of Justice refers the case back to the IRS for collection after the judgment is obtained. Section 6331(k) does not limit the collection options of the Department of Justice once a case has been referred to the Department by the IRS .

The regulations provide that the statute of limitations for collection under section 6502 is suspended while a proposed installment agreement is pending, for thirty days after rejection or termination of an installment agreement, and during a timely filed appeal of the rejection or termination decision. The running of the collection statute resumes after an installment agreement takes effect. The statute of limitations for collection shall continue to run if an exception under this section applies and levy is not prohibited with respect to the taxpayer.

These regulations apply to installment agreements proposed or entered into on or after the date final regulations are published in the Federal Register . However, the rules set forth in these regulations mirror practices the IRS has been following administratively since the enactment of RRA 1998.



Special Analyses

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the preceding notice of proposed rulemaking was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.



Drafting Information

The principal author of these regulations is Frederick W. Schindler, Office of the Associate Chief Counsel (Procedure & Administration), Collection, Bankruptcy & Summonses Division.



List of Subjects in 26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.



Adoption of Amendments to the Regulations

Accordingly, 26 CFR Part 301 is amended as follows:



PART 301 --PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read in part as follows:

Authority: 26 U.S.C. 7805 ***

Par. 2. Sections 301.6331-3 and 301.6331-4 are added to read as follows:



301.6331-3 Restrictions on levy while offers to compromise are pending.

Cross-reference. For provisions relating to the making of levies while an offer to compromise is pending, see 301.7122-1.



301.6331-4 Restrictions on levy while installment agreements are pending or in effect.

(a) Prohibition on levy --(1) In general. No levy may be made to collect a tax liability that is the subject of an installment agreement during the period that a proposed installment agreement is pending with the Internal Revenue Service ( IRS ), for 30 days immediately following the rejection of a proposed installment agreement, during the period that an installment agreement is in effect, and for 30 days immediately following the termination of an installment agreement. If, within the 30 days following the rejection or termination of an installment agreement, the taxpayer files an appeal with the IRS Office of Appeals, no levy may be made while the rejection or termination is being considered by Appeals. This section will not prohibit levy to collect the liability of any person other than the person or persons named in the installment agreement.

(2) When a proposed installment agreement becomes pending. A proposed installment agreement becomes pending when it is accepted for processing. The IRS may not accept a proposed installment agreement for processing following reference of a case involving the liability that is the subject of the proposed installment agreement to the Department of Justice for prosecution or defense. The proposed installment agreement remains pending until the IRS accepts the proposal, the IRS notifies the taxpayer that the proposal has been rejected, or the proposal is withdrawn by the taxpayer. If a proposed installment agreement that has been accepted for processing does not contain sufficient information to permit the IRS to evaluate whether the proposal should be accepted, the IRS will request the taxpayer to provide the needed additional information. If the taxpayer does not submit the additional information that the IRS has requested within a reasonable time period after such a request, the IRS may reject the proposed installment agreement.

(3) Revised proposals of installment agreements submitted following rejection. If, following the rejection of a proposed installment agreement, the taxpayer makes a good faith revision of the proposal and submits the revision within 30 days of the date of rejection, the provisions of this section shall apply to that revised proposal.

(4) Exceptions. Paragraph (a)(1) of this section shall not prohibit levy if the taxpayer files a written notice with the IRS that waives the restriction on levy imposed by this section, the IRS determines that the proposed installment agreement was submitted solely to delay collection, or the IRS determines that collection of the tax to which the installment agreement or proposed installment agreement relates is in jeopardy.

(b) Other actions by the IRS while levy is prohibited --(1) In general. The IRS may take actions other than levy to protect the interests of the Government with regard to the liability identified in an installment agreement or proposed installment agreement. Those actions include, for example --

(i) Crediting an overpayment against the liability pursuant to section 6402;

(ii) Filing or refiling notices of Federal tax lien; and

(iii) Taking action to collect from any person who is not named in the installment agreement or proposed installment agreement but who is liable for the tax to which the installment agreement relates.

(2) Proceedings in court. Except as otherwise provided in this paragraph (b)(2), the IRS will not refer a case to the Department of Justice for the commencement of a proceeding in court, against a person named in an installment agreement or proposed installment agreement, if levy to collect the liability is prohibited by paragraph (a)(1) of this section. Without regard to whether a person is named in an installment agreement or proposed installment agreement, however, the IRS may authorize the Department of Justice to file a counterclaim or third-party complaint in a refund action or to join that person in any other proceeding in which liability for the tax that is the subject of the installment agreement or proposed installment agreement may be established or disputed, including a suit against the United States under 28 U.S.C. 2410. In addition, the United States may file a claim in any bankruptcy proceeding or insolvency action brought by or against such person. If a person named in an installment agreement is joined in a proceeding, the United States obtains a judgment against that person, and the case is referred back to the IRS for collection, collection will continue to occur pursuant to the terms of the installment agreement.

(c) Statute of limitations --(1) Suspension of the statute of limitations on collection. The statute of limitations under section 6502 for collection of any liability shall be suspended during the period that a proposed installment agreement relating to that liability is pending with the IRS , for 30 days immediately following the rejection of a proposed installment agreement, and for 30 days immediately following the termination of an installment agreement. If, within the 30 days following the rejection or termination of an installment agreement, the taxpayer files an appeal with the IRS Office of Appeals, the statute of limitations for collection shall be suspended while the rejection or termination is being considered by Appeals. The statute of limitations for collection shall continue to run if an exception under paragraph (a)(4) of this section applies and levy is not prohibited with respect to the taxpayer.

(2) Waivers of the statute of limitations on collection. The IRS may continue to request, to the extent permissible under section 6502 and 301.6159-1, that the taxpayer agree to a reasonable extension of the statute of limitations for collection.

(d) Effective date. This section is applicable on [INSERT DATE FINAL REGULATIONS ARE PUBLISHED IN THE FEDERAL REGISTER].

David A. Mader,

Assistant Deputy Commissioner of Internal Revenue

Approved: December 11, 2002.

Pamela F. Olson,

Assistant Secretary of the Treasury (Tax Policy)

DALE D. GODDE

CERTIFIED COPY

 

Home ] Services ] FAQ ] Site Map ] Contact Us ]

Presented by Alvin Brown and Associates, tax attorney, formerly with the Office of the Chief Counsel of the IRS. 
Call us for all IRS tax issues, problems and emergencies
Protect yourself from IRS intimidation, errors, and penalties.
www.irstaxattorney.com - ab@irstaxattorney.com - (888) 712-7690 - (703) 425-1400